Fed seen hiking rates in defiance of Trump

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyFed seen hiking rates in defiance of TrumpThe U.S. central bank will release a post-meeting statement at 2 p.m. Wednesday, with updated economic forecasts and rate projectionsAuthor of the article:Last updated 14 minutes ago As recently as Sunday, Donald Trump repeated his argument that the United States should have the lowest borrowing costs in the world. Photo by Al Drago/Bloomberg via Getty ImagesThe Federal Reserve is expected to lift interest rates on Wednesday for the first time since 2023 as policymakers lose confidence that inflation will cool sufficiently without at least a nudge from the central bank.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThat’s likely to strain Chairman Kevin Warsh’s relationship with President Donald Trump.Officials have held their benchmark rate steady in a range of 3.5 per cent-3.75 per cent since December as a majority of policymakers argued that progress in lowering inflation was being stalled by temporary factors.Doubts over that stance have grown steadily this year within the Fed, and a recent hot inflation report appears to have tipped the scales in favour of at least one near-term rate increase. Investors on Tuesday saw a greater than 90 per cent chance of a quarter-point move this week and priced in another hike by the end of the year.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try again“At some point they have to raise interest rates,” said Sebnem Kalemli-Ozcan, a professor of economics at Brown University. “And, actually, the more this is kicked down the road, the more inflation is going to be persistent and the bigger a problem it is then.”The Fed will release a post-meeting statement at 2 p.m. Wednesday in Washington, together with updated economic forecasts and rate projections. Warsh is scheduled to hold a post-meeting press conference 30 minutes later.White House WorriesA rate hike could provoke fresh criticism from the White House. As recently as Sunday, Trump repeated his argument that the United States should have the lowest borrowing costs in the world.The president has significantly toned down his attacks on the Fed since he appointed Warsh to replace Jerome Powell as chair. He even suggested Warsh was being pressured to raise rates by other Fed officials, whom he accused of being “very political.”But Warsh made clear in a late August speech that underlying price pressures hadn’t meaningfully improved, and the Fed had “work to do” if it didn’t receive new assurances that inflation was on a path to the central bank’s two per cent target.Two weeks later, data showed core inflation — which excludes food and energy — rose more than expected in August. Though much of the increase was driven by a record spike in wireless telephone services, many analysts said the Fed couldn’t ignore the report after missing its two per cent goal for more than five years.Press ConferenceWarsh’s comments will be closely scrutinized when he takes questions from the reporters. At his post-meeting appearance on July 29, he failed to offer a clear explanation for the Fed’s decision to hold rates and provided little insight into his views on the economy. That prompted a jump in long-term bond yields and a wave of criticism from traders and economists.Yet, the chairman’s speech in Jackson Hole, Wyoming, last month appeared to quell investors’ concerns. A rate hike on Wednesday could further repair any lingering damage.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Reporters are likely to again press the chairman for an explanation of the committee’s decision and push for any hint that one rate increase might mark the beginning of a hiking cycle. While he’s unlikely to offer a clear signal on the future path of rates, Warsh could again frustrate investors if he resists sharing his views on where the economy stands now.Dissents PossibleConcerns have been mounting within the Fed all year that a series of seemingly temporary factors, including tariffs and the war in Iran, risked embedding high inflation in the public’s expectations.Three officials dissented at the Fed’s July meeting in favour of higher rates. A hike at this gathering could also be backed by several colleagues who indicated prior to the August inflation report that they required an improvement in price data to continue holding policy steady.But a unanimous decision isn’t assured. Governor Christopher Waller has given mixed signals on his read of inflation, and New York Fed chief John Williams said earlier this month there was still evidence that disinflation was on the way. Several economists also predicted Vice Chair for Supervision Michelle Bowman, who is seen as closely aligned with the White House, might dissent in favour of holding rates.Policymakers this week will also submit updated economic forecasts and interest-rate projections. Economists in a recent Bloomberg survey expected them to hold their outlooks for unemployment and inflation largely unchanged. Projections for rates should reveal how many officials expect additional rate hikes this year.Those projections, however, are unlikely to include a contribution from Warsh, who didn’t participate when officials last submitted projections in June.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.