Fed Set to Raise Rates Despite Trump's Demands

The Federal Reserve is expected to raise its benchmark interest rate on Wednesday for the first time in three years, despite President Donald Trump's calls for a cut. The rate hike would be aimed at fighting stubbornly high inflation, which has remained above the Fed's target of 2%.

According to analysts and economists, a quarter-point increase in the Fed's rate, currently around 3.6%, is likely to happen after Fed Chair Kevin Warsh's speech at the annual conference in Jackson Hole, Wyoming, where he argued that the Fed had not yet achieved its goal of putting inflation in check.

However, some members of the Fed's interest-rate setting committee still expect inflation to fade over time and may not feel a rate hike is necessary. Warsh has not made this argument, saying recent inflation reports 'do not tell me that underlying trends have improved,' adding that if such improvement wasn't seen soon, 'we have work to do.'

Investors are anticipating a 90% chance of a rate hike on Wednesday, following the release of a strong inflation report last week. A rate increase could raise questions about how many hikes will be implemented and how effective they will be in reducing inflation.