Warsh Likely to Hike Rates Amid Trump Pressure
Kevin Warsh, Chairman of the Federal Reserve Board, is facing pressure from President Donald Trump to cut interest rates or leave them unchanged. However, economists expect him to side with financial markets and raise the key rate on Wednesday.
The Fed has been warning about high inflation, which remains above its 2% target. A report last week showed that inflation is still stubbornly high, further solidifying investors' expectations of a rate hike.
Warsh's decision will be crucial in maintaining the Fed's credibility with financial markets and avoiding a replay of what happened in late July when he provided little explanation for his decision at a press conference. Investors had pushed up longer-term interest rates, accelerating a process that is still ongoing.
The rate on the 10-year Treasury bond reached 5% for the first time in three years, while mortgage rates have also risen. A quarter-point rate increase would be the first in three years and push the Fed's benchmark rate to about 3.9%.