Fed's Warsh Faces Pressure to Hike Rates as Inflation Persists

Federal Reserve Chair Kevin Warsh is under increasing pressure to raise interest rates to combat inflation. The Fed's preferred measure of inflation has topped its 2% target for more than five years, and core inflation has been stuck at around 3% or higher since 2023.

Warsh has emphasized that the Fed will get inflation back to 2%, but has not specified how. In his first news conference as chair, he made clear he wouldn't provide signals about the Fed's next steps. However, in congressional testimony, he said the Fed has 'no tolerance' for higher inflation and pledged to deliver price stability.

Some Fed officials, including Lorie Logan, president of the Federal Reserve Bank of Dallas, have said that modestly higher interest rates would better balance the outlook. Others, like Christopher Waller, an influential member of the Fed's governing board, have suggested that hiking rates 'in the near term' may be necessary if core inflation keeps climbing.

However, not everyone agrees that rate hikes are needed. John Williams, president of the New York Fed and vice chair of the Fed's rate-setting committee, has said there are encouraging reasons to expect that inflation has peaked and should edge down in the coming quarters.