Warsh Faces Dilemma as Trump Pressures Rate Cuts Ahead of Key Hike

Kevin Warsh, Federal Reserve Chair since May 22, is facing a dilemma between financial markets that expect interest rate hikes and President Donald Trump's pressure to cut rates or leave them unchanged.

Warsh has largely boxed himself into raising interest rates after delivering a high-profile speech in August warning of inflation above the Fed's 2% target. A recent report showed inflation remains stubbornly high, sealing investors' expectations for a rate hike on Wednesday.

The Fed's benchmark rate is expected to rise by a quarter-point to about 3.9%, marking its first increase in three years. While campaigning for the top job last year, Warsh said the Fed could lower interest rates. However, since getting the nod, inflation has risen due to the Iran war and tariffs, reaching 3.7% in July.

Core inflation, excluding volatile food and energy categories, was 3.3% in July, up from 3% before the Iran war. Economists expect Warsh to side with financial markets, but it's unclear how many more rate hikes will follow.