Federal Reserve policymakers are expected to hold interest rates steady on Wednesday, posing an early test for new chairman Kevin Warsh as rising inflation erodes households’ purchasing power and President Donald Trump continues to press for lower borrowing costs.
In his first meeting leading the US central bank, Warsh is presiding over a Federal Open Market Committee where several participants have grown increasingly worried about stubborn inflation. A jump in energy prices after the outbreak of the US war in Iran only amplified those concerns. Several officials have now outlined scenarios they believe could warrant rate hikes and want to eliminate language in their post-meeting statement suggesting their next move is likely to be a cut.
That tweak in wording could become a reality at this week’s gathering, pushing Warsh into a delicate balancing act. Prior to his nomination for Fed chief, Warsh appeared in line with Trump’s calls for the Fed to lower rates. Now, the new chairman will have to contend with an inflation backdrop — and his colleagues’ views — that has made it more difficult to deliver what the president wants. Investors see more than an 80% chance the Fed raises rates by December, according to pricing in federal funds futures.
