Trump's Rate Cut Dreams Crushed as Fed Prepares for Biggest Hike in Years

Despite Donald Trump's efforts to lower interest rates, the Federal Reserve seems poised to raise them next week. The CME FedWatch Tool puts the chances of a rate hike at nearly 90%. This goes against what Trump promised during his presidency, when he said Jerome Powell was the problem and replaced him with Kevin Warsh. However, Warsh has not cut interest rates once since taking office.

Warsh's decision to raise rates is seen as a way to combat inflation, which remains entrenched in the economy. Analysts point out that core prices rose 0.3% in August, exceeding expectations of 0.2%. Gasoline prices jumped 3.9% in a single month.

Not everyone agrees with Warsh's decision. Daniel Lacalle, chief economist at Tressis, argues that raising rates now would go against the Fed's dual mandate of price stability and maximum employment. He warns that a rate hike could engineer a private sector recession and hurt job creation.