United States (U.S.) President Donald Trump picked Kevin Warsh to lead the Federal Reserve after spending years complaining that interest rates were too high and clashing with former Fed Chair Jerome Powell. However, just four months into the job, Warsh may be about to do the exact opposite of what the US president wanted.
The Federal Reserve is widely expected to raise interest rates on Wednesday, with 85% of economists surveyed expecting the move. If they are right, the benchmark rate will rise from its current 3.5%-3.75% range to 3.75%-4%. It would be the first US interest rate hike since 2023 and the first under Warsh.
Prices have proved much harder to bring under control than expected, with the Fed's preferred inflation measure running at 3.7%, well above its 2% target. The war in the Middle East and higher energy prices have added to that problem, while the US economy has remained strong enough to give the Fed room to act. Warsh had already hinted at what was coming, stressing that the Fed's job was to get monetary policy right rather than tell markets what they wanted to hear.
The situation is very different from what Trump wanted when he chose Warsh to replace Jerome Powell. The Republican president had repeatedly demanded lower rates and argued that cheaper borrowing would help Americans buying homes and businesses looking to invest. Markets are now treating a hike as almost a done deal, with futures putting the probability above 90%.