Warsh's Jackson Hole encore may put Trump's inflation record under a microscope

U.S. Federal Reserve Chairman Kevin Warsh, appointed by President Donald Trump, now faces intense scrutiny over his remarks at the Jackson Hole conference. Warsh suggested higher interest rates may be needed to curb inflation, which has remained above the central bank's 2% target. If economic data for August does not align with the committee's September decision, Warsh's credibility could suffer.

A possible rate hike later this month would be a strong signal that the Trump administration has failed to control inflation and won't receive Fed assistance in lowering borrowing costs on the national debt. However, Warsh must avoid contradicting his own words, as Trump believes Warsh wants to cut rates but is hindered by others at the Fed.

The Fed is expected to meet on September 15-16, with investors now seeing a roughly two-to-one chance of a quarter-percentage-point hike in the overnight policy rate.