Warsh's Tightrope: Fed Faces Pressure to Hike Rates Amid Inflation Concerns

The Federal Reserve is expected to keep its key interest rate unchanged when it meets on Tuesday and Wednesday, but Chairman Kevin Warsh faces increasing pressure to hike rates soon. This move could provoke ire from President Donald Trump, who appointed him.

Warsh has emphasized that the Fed will get inflation back to 2% without specifying how. In his first news conference as chair last month, he made clear he wouldn't provide signals about the Fed's next steps like his predecessors did.

Lorie Logan, president of the Federal Reserve Bank of Dallas and a voting member of the Fed's rate-setting committee, said 'modestly higher interest rates would better balance the outlook.' The yield on the 10-year Treasury note briefly topped 4.7% last Thursday, the highest in about 18 months.

Warsh's tough talk has pushed up borrowing costs and raised expectations that he will follow through with action. James Bullard, a former president of the St. Louis Fed, said Warsh's rhetoric 'has been very effective' but markets demand action. Christopher Waller, an influential member of the Fed's governing board, said if core inflation keeps climbing, the Fed's rate-setting committee 'will need to consider' hiking rates 'in the near term.'