US Fed to deliver rate decision with markets betting on hike

The US Federal Reserve is set to announce its decision on interest rates for the world's largest economy on Wednesday, September 16. Markets are predicting the central bank will raise rates to combat surging inflation. The Federal Open Market Committee, consisting of 12 voting members, has been meeting for two days and will announce a decision at 2pm (2am, Thursday, Singapore time). Fed Chair Kevin Warsh will give a press conference following the announcement.

The US economy has been grappling with inflation above the Fed's target of 2%. This issue has intensified since President Donald Trump's war on Iran and his tariff policies, as well as the AI boom. The Fed has maintained a steady rate since January, waiting to assess the impact of energy price shocks and the effects of tariffs on prices.

At the last meeting in July, a quarter of the committee's voting members disagreed with the decision to maintain rates, calling for an immediate increase. Since then, other policymakers, including Warsh, have suggested that if inflation does not subside, the Fed may need to intervene. On August, the consumer inflation index was 3.4%, unchanged from the previous month but still significantly higher than the Fed's target.

The Fed's move to raise rates this week will likely anger Trump, who has urged the independent central bank to lower rates to boost economic activity. Trump's administration has even launched a criminal probe against Warsh's predecessor, Jerome Powell, who faced frequent insults and berating from the president. However, analysts argue that Warsh will prove his credibility by backing the rate hike, despite Trump's opposition.

If the Fed does decide to raise rates, Trump may intensify his attacks on the central bank, increasing the pressure on the board to remove members who are seen as "hawkish." The Fed is legally obligated to maintain maximum employment and keep inflation at its two-percent target. It does this by adjusting the key US interest rate, with lower rates stimulating economic activity but potentially fueling inflation, while higher rates cool both activity and prices.