Warsh Puts Pressure on Fed to Raise Rates Amid Inflation Concerns

Federal Reserve Chair Kevin Warsh has raised expectations for a potential rate hike in September. In his speech at the Fed's annual Jackson Hole economic conference, he opened the door to raising borrowing costs but didn't commit to any particular timing. Analysts saw strong hints that a rate increase in September is a real possibility.

Warsh noted that he and other Fed officials who supported keeping rates unchanged at their July 28-29 meeting 'thought the wiser course was to await new information in the intermeeting period ... before deciding whether a change in interest rate policy was advisable.' However, he said that such evidence hasn't emerged, even as gas prices have come down somewhat.

Adam Posen, president of the Peterson Institute for International Economics, warned that if inflation remains high and Warsh doesn't follow through on a rate hike, his credibility could take a hit. 'You are basically setting yourself up so that if you don’t hike in September, people may ask what’s going on,' he said.

The Fed is scheduled to meet twice before the upcoming midterm elections, in September and late October. Any decision to lift interest rates at those meetings could spark a response from President Donald Trump, who has often accused the Fed of having political motivations.