Federal Reserve’s Warsh comments may overshadow rate hike decision

The Federal Reserve is widely expected to raise interest rates by 25 basis points when the FOMC wraps up its two-day meeting on September 16. That would push the federal funds rate to a target range of 3.75-4.00%, the first hike since 2023. What traders really care about is Kevin Warsh’s post-decision commentary. The new Fed chair, confirmed by the Senate and sworn in on May 22, is navigating his first rate decision under conditions that make a tightrope walk look relaxing. Inflation is running hot, the president wants cheaper borrowing, and markets are hanging on every syllable. The inflation problem that won’t quit The Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, clocked in at 3.7% year-over-year in July. That’s nearly double the central bank’s 2% target. Worse, the six-month annualized rate hit 4.1%, suggesting price pressures are accelerating rather than fading. Geopolitical tensions pushing up gas prices and the lingering effects of previously imposed tariffs have kept the fire burning under consumer costs. To put the duration of this inflation overshoot in perspective: prices have run above the Fed’s 2% target for 65 consecutive months as of S...