At 8 p.m. Swedish time, the time has come. The Federal Reserve will announce its interest rate decision, and just under four months into his new job, Fed Chairman Kevin Warsh is expected to deliver the first interest rate hike in three years - at least if the market is to be believed. Ahead of the announcement, there is a 92 percent chance of an increase.
Precarious position
Warsh, who before taking office suggested that the Fed could very well implement further interest rate cuts, has now found himself in a precarious position. US inflation is clearly above the central bank's inflation target and gasoline and diesel prices have skyrocketed as a result of the Iran war. This means that he and the board are expected to raise the policy rate to overcome inflationary pressures and thereby go against Trump.
"I'm sure he won't be super happy, but he will defend Kevin Warsh's independence," said Kevin Hassett, economic adviser to Trump, about how the president would react to a rate hike.
Criticism from Trump
Warsh was appointed by Trump himself, who on several occasions criticized his representative Jerome Powell for not lowering the policy rate.
Although there is now a high probability of an interest rate hike, it remains uncertain how many increases will follow, or whether the Fed will choose to pause completely.
Traditionally, the US central bank has initiated a cycle of measures when raising rates. Only on one occasion, in 1997, under then-Fed Chairman Alan Greenspan, did it choose to implement a single hike.
At present, the market view is that interest rates will also be raised in December and March. However, in connection with Wednesday evening's announcement, several clues may emerge as to what will happen next.
