Warsh Under Pressure as Fed Considers Rate Hike Amid Inflation Worries

Federal Reserve Chair Kevin Warsh is facing pressure to raise interest rates as the central bank meets in September, despite President Trump's calls for rate cuts. Inflation has remained above the Fed's target rate of 2 percent, with annual inflation at 3.4 percent in August, unchanged from July.

Roughly 85 percent of economists surveyed by Reuters predicted a quarter-point rate hike after the latest consumer price index release, an increase from the roughly 70 percent who said so before the CPI report. Traders are pricing in a nearly 93 percent chance of a quarter-point increase on Tuesday, according to the CME FedWatch tool.

Warsh has been closely attuned to inflation and underscored at an annual gathering of central bankers last month that the responsibility for sustained, elevated inflation sits squarely with the central bank. Analysts widely viewed his remarks as 'more hawkish than anticipated', noted Jerry Tempelman, vice president of economic and fixed income research at Mutual of America Capital Management.

The Fed chair will be hard-pressed to explain the Fed's monetary policy stance if it does not raise short-term interest rates at this week's FOMC meeting, Tempelman added. Trump has continued to argue for rate cuts but has refrained from directly criticizing Warsh until recent weeks, when he ramped up his pressure campaign.