Warsh Faces Trump Pressure as Rate Hike Expected at Fed Meeting

Fed Chair Kevin Warsh is facing pressure from President Donald Trump to keep interest rates low, but economists expect him to side with financial markets and raise rates on Wednesday. In a speech last month, Warsh warned that inflation remains above the Fed's 2% target and may require higher borrowing costs to bring it down.

A report showing stubbornly high inflation has sealed investors' expectations of a rate hike, which could be a quarter-point increase to about 3.9%. This would be the first hike in three years and follows a similar warning from Warsh's predecessor, Jerome Powell, who was criticized by Trump for not cutting rates quickly enough.

Economist Diane Swonk noted that a rate hike now could lower long-term rates later, but failing to do so would risk further tightening of financial markets. Fed policymakers will release their quarterly economic projections on Wednesday, which will include a forecast of where the benchmark rate will be at the end of this year and next.