Kevin Warsh, Donald Trump’s pick for Fed chair, expected to raise rates despite intense pressure from president
According to a Duke University survey of 32 former Fed governors, regional presidents and staffers, 29 endorsed a rate hike, two didn’t answer and one said the Fed should stay on hold.
“The Fed and new chair’s credibility is on the line,” one former official said.
I am no longer confident that PCE inflation will return to 2% in the next year or two without the Fed raising interest rates.
Above all, the upside risks to the inflation outlook have worsened since July: energy prices have not reversed as expected, tariff pass-through continues, and the AI build-out is adding to price pressures.
Earlier in the year, it appeared that there was some hope that inflation would decline closer to its 2 percent target within a year or two. That now appears less likely.
While some of the effects of tariffs and war-induced shortages may manifest as price-level effects, with temporary inflation consequences, it’s hard to have much confidence in that. Thus, a more sustained increase in inflation is quite possible.
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