The Federal Reserve may announce an interest rate hike at its Wednesday meeting. This decision comes amid increasing pressure from the White House, led by Donald Trump, to reduce the cost of money.
The Federal Reserve could raise interest rates this Wednesday, following pressure from the White House to lower the cost of money. According to expansion.com, 90% of the market anticipates this move to address the persistent inflation that has reached a year-on-year increase of 3.4% in August.
The Fed chairman, Kevin Warsh, faces a dilemma, as his relationship with President Donald Trump has significantly strained. Trump has urged that interest rates be lowered, threatening to end trade with countries with which the United States has a trade deficit if his demands are not met.
Warsh, who took office in May, is risking his credibility at this meeting. The pressure from Trump intensifies just as the Fed prepares for its first rate hike in three years, currently in the range of 3.5% to 3.75%.
Analysis from Bank of America and UBS suggests a likely increase of 25 basis points at this meeting, with expectations of further hikes in the future depending on the evolution of inflation and energy prices. For its part, Goldman Sachs also aligns with this expectation, although they warn that the increases may be limited.
The conflict between the Fed and the Trump administration could intensify in the coming months, just before the November midterm elections, adding a political component to the economic decision that will be made.
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