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Fed Chair Warsh faces pressure to hike rates amid renewed inflation risks
The AP notes Fed officials say core inflation has held near or above 3% since 2023, while higher oil, AI-related costs, and new tariffs could complicate the path back to 2%.
The Federal Reserve is expected to keep its key interest rate unchanged at its two-day meeting, but pressure is building for Chair Kevin Warsh to raise rates soon, a move that could draw criticism from President Donald Trump who appointed Warsh, according to AP. AP reports that the reintensification of the Iran war has pushed oil and gas prices higher, worsening inflation expectations in the months ahead. The buildout of artificial intelligence is also lifting costs for items such as laptops and smartphones and increasing electricity demand, while tariff price increases may follow Trump’s new duties on dozens of U.S. trading partners.
Even if some price increases prove temporary, the AP says inflation measured by the Fed’s preferred gauge has been above the 2% target for more than five years, and core inflation has risen since last December and has remained around 3% or higher since 2023. AP adds that Dallas Fed President Lorie Logan, a voting member of the rate-setting committee, said inflation does not appear to be on a sustainable path back to 2% and that modestly higher rates could better balance the outlook. Warsh, who has emphasized getting inflation back to 2% without laying out specific next steps, has told lawmakers the Fed has “no tolerance” for higher inflation.