US Fed to deliver rate decision with markets betting on hike

The United States Federal Reserve is set to announce its decision on interest rates on Wednesday, September 16. Markets are anticipating a rate hike to combat inflation that has been surging in the country. The Federal Open Market Committee, comprising 12 voting members, has begun its second day of meetings and will announce the decision at 2pm (2am, Thursday, Singapore time). Fed Chair Kevin Warsh will speak at a press conference following the announcement.

Inflation has been a persistent issue for the US economy, with prices surging due to various factors, including President Donald Trump's trade policies and the ongoing artificial intelligence boom. The Fed has kept rates steady since January, waiting to assess the impact of energy price shocks and tariff-induced price changes in the economy. At their last meeting in July, a quarter of the committee's voting members had voted for an immediate rate increase, calling for action to address the inflation surge.

Since then, other policymakers, including Warsh, have indicated that if inflation does not decelerate significantly, the Fed may need to intervene. The latest consumer inflation index released on Friday showed a 3.4% increase from the previous month, remaining well above the Fed's two-percent target. This data fueled market expectations of a rate hike at this week's meeting, with an over 92% probability according to CME's FedWatch tool.

The prospect of a rate hike has raised concerns, particularly for President Trump, who has pressured the independent central bank to lower rates to stimulate economic activity. Trump's administration has even launched a criminal probe against Warsh's predecessor, Jerome Powell, and is attempting to remove Fed Governor Lisa Cook. Despite this, key Trump economic advisor Kevin Hassett has not opposed a rate hike, stating that the White House would respect the decision if it is made.

Warsh, nominated amid a contentious Senate confirmation process, may use this opportunity to prove his credibility and challenge Trump's opposition to a hike. If the Fed proceeds with the rate increase, Trump might intensify his attacks on the central bank. Claudia Sahm, chief economist at New Century Advisors, expressed concern that the Fed has to prove its actions through higher mortgage rates, which is an unfortunate situation.