Kevin Warsh took office as Federal Reserve chairman in May, during a ceremony at the White House. At the time, President Donald Trump praised his choice and encouraged him to be totally independent, going so far as to say "do whatever you want." The ceremony marked the beginning of a term that now faces its first major challenge.
The Federal Reserve faces growing pressure to raise interest rates and contain high inflation in the United States. The consumer price report released on Friday showed that so-called core inflation advanced at a faster pace than expected in August, reinforcing concerns about inflationary pressure in the country.
Futures markets price in more than 85% probability of an interest rate hike at the Fed meeting scheduled for September 15 and 16. This scenario represents a significant shift in economic expectations and places monetary authorities in a delicate position.
This situation places Warsh on a direct collision course with Trump, who repeatedly pressured the central bank to cut interest rates. The apparent freedom granted by the president during the inauguration will now be tested, as the Fed decides between meeting political pressures or acting to control inflation.
