Will tough talk be enough? Fed Chair Warsh faces pressure to combat inflation - AP News

What the report says

The Associated Press reports that the Federal Reserve is widely expected to leave its benchmark interest rate unchanged at its Tuesday-Wednesday meeting in Washington, even as Chair Kevin Warsh faces growing pressure to raise rates if inflation does not improve. Warsh, appointed by President Donald Trump, could face political backlash from the White House if the central bank moves toward tighter policy.

AP says several inflation risks are converging: renewed war involving Iran has pushed oil and gasoline prices higher, heavy investment in artificial intelligence infrastructure is adding to costs for devices and electricity, and tariffs imposed by Trump on many U.S. trading partners could still feed through to consumer prices. While those forces may prove temporary, the Fed’s preferred inflation gauge has remained above its 2% goal for more than five years, and core inflation has been around 3% or higher since 2023.

Dallas Fed President Lorie Logan, a voting member of the rate-setting committee, recently said inflation does not appear to be returning sustainably to target and suggested modestly higher rates could better balance risks. Since becoming Fed chair in May, Warsh has stressed that the central bank will restore price stability, but he has been less willing than predecessors to signal future decisions in advance.

The stakes extend beyond the Fed’s meeting statement. AP notes that Warsh’s tougher language and higher energy prices have already helped lift borrowing costs, with the 10-year Treasury yield briefly rising above 4.7%, a level that can influence mortgage rates and broader financial conditions.