Fed's Rate Hike Decision Looms as Trump's Wrath Awaits
The Federal Reserve is facing a critical decision on interest rates, and it's likely to have far-reaching consequences for President Trump and his administration.
The bond markets are now expecting the Fed to raise interest rates, which would make borrowing more expensive for Americans. However, this move could provoke a backlash from Trump, who wants the Fed to cut rates to boost economic growth ahead of the midterm elections in November.
The President's chosen man for the job, Kevin Warsh, is caught in the middle. He's facing pressure from both Wall Street and Trump, with his credibility on the line. If he doesn't deliver what the markets want, he could face a sell-off in bond prices, making borrowing more expensive for Americans.
Warsh has already faced criticism for his handling of inflation expectations. In July, he stated that the Fed would not waver in its pursuit of 2% inflation, but failed to explain how he would achieve it. The result was a steep sell-off in bond prices, driving up long-term interest rates.