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Fed Chair Warsh Faces Key Test as Market Sees Over 85% Chance of September Rate Hike
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Federal Reserve Chair Kevin Warsh, hand-picked by President Donald Trump and sworn in May 2026, faces a critical test this week as the Fed is expected to raise interest rates to combat elevated inflation. A hotter-than-expected August core inflation report pushed market expectations for a rate hike at the September 15-16 meeting above 85%. Trump, who has repeatedly pressed for lower rates and recently threatened to escalate trade wars if policy is not eased, said Sunday he did not know if the Fed would hike. White House officials sent mixed signals: National Economic Council Director Kevin Hassett initially said Trump would have something to say about a hike, then later softened, stating Trump would defend Warsh's independence. Analysts note Warsh's personal rapport with Trump may help soothe tensions, unlike his predecessor Jerome Powell, who faced years of unprecedented public attacks from Trump for raising rates. The decision comes just ahead of midterm elections, with voter dissatisfaction over rising living costs pressuring the administration.
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By Andrew Ackerman Sun, September 13, 2026 at 1:00 PM PDT | 5 min read
(Bloomberg) — When Kevin Warsh was sworn into office at a White House ceremony in May, President Donald Trump praised his hand-picked Federal Reserve chairman and encouraged him to be "totally independent."
"Just do your own thing," Trump said.
That latitude from the president will be tested this week as the Fed faces mounting pressure to hike interest rates to tame elevated inflation. Friday's report on consumer prices showed so-called core inflation grew at a hotter-than-expected pace in August, pushing investors' expectations for a rate increase at the Fed's September 15–16 meeting above 85% in futures markets.
The move puts Warsh on a collision course with a president who has repeatedly pressed the central bank to slash rates. Trump recently threatened to escalate his trade wars if policy isn't eased, and on Sunday he repeated his argument that U.S. borrowing costs should be the lowest in the world.
Asked if he expected the central bank to raise rates at its upcoming meeting, Trump said: "I don't know."
Political Pressure Intensifies
The push for looser policy is only intensified by political angst inside the White House. Just ahead of midterm elections, polls have shown growing voter dissatisfaction over the rising cost of living. Lower rates — even if they take months to filter into real-world mortgage or credit card bills — could give Trump cover to signal economic relief was on the way and shift blame away from the administration.
That dynamic leaves Warsh trapped in an institutional vise just weeks before voters head to the polls.
"They really are in a no-win situation where they incur the president's wrath or diminish their credibility in the markets, with consequences for inflation that are probably more severe down the road," said Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund. "I don't think Warsh wants to go down as the Fed chairman who buckled to administration pressure when the Fed's mandate was at stake."
Mixed Signals from the White House
Since the new inflation report, one White House official has offered mixed signals over how the president might react to a rate increase.
On Friday, National Economic Council Director Kevin Hassett told Bloomberg TV that Trump still wanted rates to go down and, if the Fed hiked, "The president will have something to say about it."
On Sunday, Hassett softened that somewhat.
"If it's a rate hike, then the president — I'm sure he's not going to be super happy about it, but he will defend the independence of Kevin Warsh above all," he said on Fox News Sunday.
Lessons from the Powell Era
If Warsh's predecessor is any gauge, he may be in for trouble. Trump's first Fed chair, Jerome Powell, was sworn into office in early February 2018, and by July of that year the president was publicly criticizing him for raising rates. Years of unprecedented attacks followed.
Yet Powell maintained a distant, formal posture with the White House. Warsh, by contrast, has spoken informally with Trump multiple times since taking office. Some Fed watchers believe that, even if the central bank proceeds with a new round of rate hikes, Warsh can soothe Trump by relying on his personal rapport with the president.
"He can flatter the president on the phone and listen to him and hear him out," said Michael Redmond, U.S. economist at consulting firm Energy Aspects. "Maybe there isn't such a squeeze on Warsh."
Still, Warsh is treading a delicate path with a White House that has applied intense pressure on the central bank — and not only through verbal attacks.
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Fed Chair Warsh faces intensifying pressure to raise rates after hot CPI data