Warsh Faces 'No-Win' Situation on Interest Rates Amid Pressure from Trump

US Federal Reserve Chair Kevin Warsh is facing a 'no-win' situation as he prepares to make a decision on interest rates. The pressure is mounting for him to raise rates if inflation does not ease, but doing so would put him at odds with President Trump.

Warsh cleared up confusion about the Fed's commitment to getting inflation down to 2% during his first appearance as chair at the annual conference in Jackson, Wyoming. He acknowledged that the US Fed might have 'work to do' to make good on that pledge and suggested a readiness to raise interest rates if price pressures do not ease.

Financial markets now see a quarter-point increase at the Fed's September 15-16 meeting as more likely than not, leaving Warsh with a tough decision. Another month of benign inflation data would alleviate the pressure on him to raise rates in September, but he would still need to explain how doing nothing aligns with his intolerance for elevated inflation.

Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics, said Warsh has 'multiple targets on his back' and that it's a 'no-win situation'.