Federal Reserve's rate-hike decision under Trump pressure

The Federal Reserve is expected to raise its benchmark interest rate on Wednesday for the first time since July 2023, a striking break with President Trump, who handpicked Fed Chair Kevin Warsh specifically to lower rates and has kept demanding lower borrowing costs. Inflation has stayed stubbornly above the Fed's 2% target, with the war in the Middle East pushing up energy prices and threatening to make it more persistent, and Wall Street expects a second hike in December.

Economists are split on the risk: some warn that tightening into an economy already showing strain, with mounting consumer debt, weaker spending and longer spells of unemployment, could trigger layoffs and a self-reinforcing downturn, while others worry the handful of increases the market expects may not be enough to curb AI-driven inflation. Either way, the decision puts Warsh at odds with the president who appointed him, and investors will be watching for any hint of how far he is prepared to go.