Warsh May Leave Interest Rates Unchanged as Fed Makes Decision

The Federal Reserve's decision to raise interest rates is expected on September 15 and 16. Fed Chair Kevin Warsh may leave them unchanged, which some in the business press might portray as a craven surrender to President Donald Trump.

Warsh's decision will be based on job creation and inflation data. The Bureau of Labor Statistics reported that during the 12 months preceding July, the average number of jobs created was 31,000. However, in August, BLS logged 162,000 jobs created, which some argue is a strong argument for raising interest rates.

However, explanations offered thus far for why job growth abruptly increased in August have not been persuasive. Wendy Edelberg, former chief economist at the Congressional Budget Office, commented on CNBC that 'I think that these strong payroll numbers are absolutely going to get revised down.' She believes a more likely job-creation number for August was 20,000 jobs, and 'maybe zero.'

Inflation data also played a role in the Fed's decision. The Consumer Price Index climbed to 3.4 percent in August, but core inflation (inflation minus food and energy) rose only 2.4 percent over the previous 12 months.