‘In our lane’: US Fed’s Warsh defies Trump but credibility questions persist

On September 18, US Federal Reserve chair Kevin Warsh raised interest rates by 25 basis points, to a range of 3.75 to 4.00 percent, signaling further hikes before the end of the year. This decision came despite President Donald Trump's persistent pressure on the central bank to lower rates and his history of criticizing the Fed's independence.

Trump has launched a criminal investigation into Warsh's predecessor and attempted to fire another Fed governor in his quest for lower rates. While Trump initially supported Warsh's decision, he then attributed it to a "hostile board" and questioned whether the Fed chair had discussed the hike with him. Warsh responded by emphasizing that the Federal Reserve's independence means it must stick to its mandated duties.

Some, like George Washington University economics professor Pao-Lin Tien, remain skeptical of Warsh's credibility due to Trump's interference. However, others, like Brookings Institution senior fellow David Wessel, believe Warsh managed the situation well and that the president did not blame him personally for the rate hike. Regardless of the president's influence, economists agree that a rate hike was necessary to combat inflation, which has remained above the Fed's two-percent target for over five years.