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WASHINGTON (AP) — Barely four months into the job, Federal Reserve Chair Kevin Warsh is stuck between two strong and opposing forces: Financial markets that anticipate the central bank will raise interest rates, and President Donald Trump, who wants the Fed to cut them or leave them unchanged. Economists expect that on Wednesday, Warsh and his fellow policymakers will side with the markets. Warsh, economists say, has largely boxed himself into a rate hike after delivering a high-profile speech last month warning that inflation remains too far above the Fed’s 2% target and might require higher borrowing costs to bring it down. A report last week showing inflation is still stubbornly high largely sealed investors’ expectations. Warsh has faced this dilemma before.
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But since getting the nod, the Iran war has sharply raised gas prices , lifting inflation to 3.7% in July, according to the Fed’s preferred measure. This week, the rate on the 10-year Treasury bond reached 5% for the first time in three years.
