Fed Chair Warsh expected to raise interest rates, economists say

Economists expect that Federal Reserve Chairman Kevin Warsh will raise interest rates on Wednesday. 

Warsh warned last month that inflation remains above the Fed's 2% target and might require higher borrowing costs to bring it down, the Associated Press reported. A report last week showed inflation remains high. 

Soon after becoming chair on May 22, Warsh spoke strongly about the need to keep inflation under control, but in late July the central bank left its key rate unchanged. The chair had little to say about the reasoning for the decision, and investors responded by pushing up longer-term interest rates. 

This week, the rate on the 10-year Treasury bond reached 5% for the first time in three years, and mortgage rates, which closely follow the 10-year Treasury, have also risen. If the Fed doesn't raise interest rates Wednesday, it risks investors demanding higher interest rates on government and corporate bonds to compensate. 

Diane Swonk, chief economist at KPMG, told the Associated Press that a hike now could lower long-term rates later. 

Trump was highly critical of Warsh’s predecessor, Jerome Powell, for not cutting rates quickly enough. Kevin Hassett, Trump’s top economic adviser, told Fox News on Sunday that Trump will likely place the independence of the Fed over his desire to keep interest rates low.