Warsh Faces Toughest Test Yet as Fed Weighs Interest Rate Hike

Federal Reserve Chairman Kevin Warsh faces a crucial decision this week as he and his fellow policymakers consider whether to raise interest rates. The market has priced in a near-certain quarter percentage point hike, but it's unclear how broad the margin will be among the 12 Federal Open Market Committee voters.

While some members, including Governor Christopher Waller, have advocated for patience and caution, others like Warsh have expressed support for a rate increase. The FOMC breakdown is complex, with various opinions on whether inflation is temporary or becoming entrenched.

Assuming the three July dissenters - regional presidents Lorie Logan of Dallas, Beth Hammack of Cleveland, and Neel Kashkari of Minneapolis - still support a quarter-point hike, four other members would need to switch their votes from hold to hike. The most-watched voter is Governor Christopher Waller, who voiced support for another hold at this meeting.

Markets will look at the Fed's 'dot plot' update, which spells out anonymously the rate expectations for each participant. A 10-8 split in favor of one hike would indicate some participants might be ambivalent about the first hike and others might want to avoid pushing market expectations higher.