Warsh Under Pressure to Hike Rates as Inflation Tops Five-Year Mark

The Federal Reserve is expected to maintain its key interest rate unchanged at its meeting on Tuesday and Wednesday, but Chair Kevin Warsh faces increasing pressure to raise rates soon. This move could provoke ire from President Donald Trump, who appointed Warsh.

With inflation topping the Fed's 2% target for more than five years, some officials are urging action. Lorie Logan, president of the Federal Reserve Bank of Dallas and a voting member of the rate-setting committee, said that 'modestly higher interest rates would better balance the outlook.'

Warsh has emphasized getting inflation back to 2% without specifying how, but his tough talk has already lifted borrowing costs. The yield on the 10-year Treasury note briefly topped 4.7%, the highest in about 18 months.

Economists are divided on whether action is needed. Some, like John Williams of the New York Fed and vice chair of the rate-setting committee, believe inflation has peaked and will edge down in the coming quarters. Others, such as Vincent Reinhart, a former top Fed economist, say the Fed is looking at inflation well above goal but mostly for reasons it can't influence.