Warsh Faces Credibility Test Over Rate Hike

Fed Chairman Kevin Warsh must decide how to follow through on his promise of higher interest rates, which could be seen as inconsistent with President Donald Trump's wishes.

Last week, Warsh opened the door to higher interest rates, and now investors expect a rate hike later this month. A decision to hold rates steady would risk breaking a central bank taboo against not following up words with actions.

The Fed will receive closely watched job and consumer inflation data for August before its next meeting on September 15-16. Warsh has discouraged focusing on individual data points, but the upcoming reports are crucial in determining whether to raise rates. A rate hike would send a powerful signal from the U.S. central bank's policy committee that Trump has failed to contain inflation and will not get the Fed's help in lowering borrowing costs.