The catalysts for higher rates are strengthening even as President Donald Trump renews his calls for looser monetary policy on the eve of the first Fed policy meeting led by new Chairman Kevin Warsh.
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Kevin Warsh, 56, a former top Fed official, is becoming chair at an unusually difficult time for the independent agency.
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The Federal Reserve left its benchmark interest rate unchanged for the third straight meeting but signaled it could still cut rates in the coming months, moves that attracted the most dissents since October 1992.
Federal Reserve Chair Jerome Powell could signal he will stay with the Fed even as a Senate panel is expected to confirm his replacement.
The announcement by Sen. Thom Tillis removes a big hurdle to President Trump’s effort to install Kevin Warsh, a former high-ranking Federal Reserve official, in the job in place of Jerome Powell.
Kevin Warsh, President Donald Trump’s pick to lead the Fed, pledged independence from the White House, even as Trump said he would be disappointed if his pick doesn’t immediately cut rates.
The minutes underscore the Fed’s dilemma as it seeks to fill its congressional mandates of low inflation and maximum employment.
Rate increases by the Federal Reserve would be a sharp shift from late last year, when the central bank cut its key rate three times.
Federal Reserve Chair Jerome Powell suggested that the central bank remained concerned about inflation that was still stubbornly elevated even before the Iran conflict’s impact on gas prices.
The Fed will release a set of quarterly projections on Wednesday, and they could alter their forecast of one rate cut this year to zero.
Warsh’s nomination, which was initially announced Jan. 30, was forwarded Wednesday to the Senate, where it will be taken up by the Senate Banking Committee.
The story the Trump team is telling — that a visionary Federal Reserve chair, Alan Greenspan, fueled the 1990s boom by keeping interest rates low — is incomplete at best.
Federal Reserve governor Christopher Waller also said that the Supreme Court’s decision to strike down many of Trump’s tariffs would likely have only a limited impact on the economy and inflation, and therefore wouldn’t affect his view on rates.
President Trump told reporters Friday that he didn’t want to ask Kevin Warsh to agree to cut rates because that would be “inappropriate,” even if “it probably would be allowed.”
Whether Kevin Warsh can maintain the Fed’s long-time independence from day-to-day politics while also placating Trump will be a tremendous challenge.
Trump chose current chair Jerome Powell to lead the Fed in 2017 but this year has relentlessly assailed him for not cutting interest rates quickly enough.
The central bank said there are signs the job market has stabilized while it also said growth was “solid,” an upgrade from last month’s characterization as “modest.”
Signs that inflation is cooling could make it more likely that the Federal Reserve will reduce its key interest rate later this year, which could translate into lower borrowing costs for mortgages, auto loans and credit cards.
The unprecedented move by the Trump administration marks an escalation of the president’s longstanding feud with the central bank’s chair, though Trump denied having any knowledge of an investigation.
The minutes showed that even some Fed officials who supported the rate cut did so with reservations, with some saying they wanted to wait for more data before making any further moves.
But economists caution that persistent and potentially worsening inflation could make a January interest rate cut from the Fed less likely.
Wednesday’s cut reduced the Fed’s key interest rate by a quarter-point, to about 3.6%, the lowest it has been in nearly three years.
