Fed Expected to Raise Rates, Defying Trump's Demand for Cuts

The Federal Reserve is widely expected to raise its benchmark interest rate at its meeting concluding Wednesday, a move that would mark the first increase since 2023 and place the central bank in direct conflict with President Donald Trump's public demand for rate cuts. Market analysts and economists point to stubbornly high inflation, particularly driven by energy costs linked to the ongoing Iran war, as the primary catalyst for the anticipated policy shift. The Federal Open Market Committee is set to vote on the rate decision on Wednesday, with futures markets pricing in an 85% to 90% probability of a 25-basis-point hike. This would lift the federal funds rate from its current range of 3.50% to 3.75%. The expected increase comes after inflation has remained persistently above the Fed's 2% target, with the August Consumer Price Index showing a 3.4% annual increase. Core CPI, which excludes volatile food and energy prices, rose 0.3% month-over-month, exceeding expectations. Fed Chair Kevin Warsh, appointed by President Trump, has adopted a notably hawkish stance on inflation.