Why the Fed might raise interest rates for first time since 2023
The Federal Reserve is expected to raise interest rates for the first time in three years on Wednesday. CBS News business contributor Javier David explains more.
Federal Reserve Chair Kevin Warsh finds himself in a difficult position between financial markets anticipating a rate hike and President Donald Trump seeking to keep interest rates low. After delivering a speech last month emphasizing the need for higher borrowing costs to combat inflation, Warsh appears to be leaning towards a rate increase.
Inflation remains a significant concern, with the July figure reaching 3.7 percent, a level that has only recently started to recede from its peak in April 2025, prior to Trump's tariffs. If the Fed fails to raise rates this week, it risks being seen as capitulating to political pressure, which could damage its credibility with financial markets.
Warsh, who has previously faced criticism for his handling of inflation concerns, could potentially face pressure from his father-in-law, billionaire donor Ronald Lauder, who is also a friend of Trump. However, it remains uncertain how many more hikes may follow, as past Fed chair Alan Greenspan only made a single rate increase in 1997.
Should inflation data suggest cooling prices, there is a possibility that the Fed may decide against further rate hikes.
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