Warsh Expected to Side with Markets Over Trump on Rate Hike

Federal Reserve Chair Kevin Warsh is facing pressure from President Donald Trump to lower interest rates, but economists expect him to side with financial markets and raise them instead. This decision would be a shift in favor of market expectations, which have been driven by a recent report showing stubbornly high inflation.

Warsh has been vocal about the need for higher borrowing costs to combat inflation, which is currently at 3.7% according to the Fed's preferred measure. In a speech last month, he warned that inflation remains too far above the central bank's 2% target and may require higher interest rates.

Economists believe that if the Fed doesn't hike its key rate this week, it risks a replay of what happened in late July when investors pushed up longer-term interest rates after the central bank left its key rate unchanged.