WASHINGTON — The Federal Reserve is widely expected to lift its short-term interest rate Wednesday for the first time in three years to fight stubbornly high inflation, a move that would put the central bank at odds with President Donald Trump’s support for a cut, the Associated Press reported Tuesday.
A quarter-point increase from a rate currently about 3.6% is not guaranteed because Fed Chair Kevin Warsh has avoided the forward guidance his predecessors used. Still, most analysts expect a hike after Warsh’s Jackson Hole speech two weeks ago arguing the Fed had not yet put inflation in check. Futures markets priced roughly a 90% chance of a move after Friday’s inflation report showed core prices picking up in August.
The decision is due at 2 p.m. EDT Wednesday, followed by Warsh’s news conference. Trump has demanded cuts and said Sunday the United States “should be paying the lowest interest rate in the world.” White House economic adviser Kevin Hassett said Trump “100% respects the independence of Kevin Warsh,” while also suggesting the Fed should stay out of the way of midterm elections seven weeks away.
Oil near $100 a barrel from Middle East conflict and AI-related investment have kept inflation above the Fed’s 2% target. Economists say a hike would be Warsh’s first major credibility test since taking the chair in May; traders already price further increases in December and March.
Sources: Associated Press via WTOP, Reuters
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