‘In our lane’: Fed’s Warsh defies Trump but still fighting for credibility

Federal Reserve chair Kevin Warsh demonstrated political independence by raising interest rates just before the US midterm elections, defying President Donald Trump. However, questions remain about Warsh's credibility. The Fed increased rates by 25 basis points to between 3.75% and 4% on Wednesday, with signals of further hikes before year-end.

Trump has launched a criminal probe into Warsh's predecessor and attempted to fire another Fed governor in his pursuit of lower rates to stimulate economic growth. He frequently criticized former chair Jerome Powell but remained silent when asked about Warsh's announcement. Warsh responded, stating that part of the Fed's independence is to stay in its lane.

While for some, including economics professor Pao-Lin Tien, Trump's version of their conversation fuels skepticism about the Fed chair's independence, others, like Brookings Institution's David Wessel, believe Warsh managed the situation well and was not pressured personally. Warsh's decision to raise rates, despite Trump's demands, is seen as a demonstration of his commitment to fighting high inflation, but its impact on the Fed's independence remains uncertain.