Fed's Rate Hike Plans Meet Resistance from Economists

The Federal Reserve is facing pressure to act on inflation, which has risen above its target of 2% but remains below previous highs. Kevin Warsh, the new Fed chairman, has vowed to get inflation back to its target, and some investors suspect that he may raise interest rates as soon as Wednesday to demonstrate his commitment.

However, economists argue that raising rates may not be effective in combating supply-driven inflation, which is currently driven by a combination of factors including the war with Iran, high tariffs, and restrictive immigration policy. The Fed's tools are limited when it comes to addressing these issues, and rate hikes could even have unintended consequences such as tipping over the stock market or pushing the job market into recession.

'Rate hikes won't keep the bombs from dropping,' said Benson Durham, a former Fed official. Mark Zandi, chief economist at Moody's Analytics, agrees that raising rates would be unwise and notes that inflation expectations are not near the danger zone.