Wall Street thought the Powell hike was over. Now Kevin Warsh has his ‘back against the wall’

Live updates

1. 14h ago

   Markets Rally Despite Expectations of New Federal Reserve Rate Hikes

   Wall Street stocks rose despite higher than expected CPI and PPI data, even as analysts suggest Federal Reserve Chairman Kevin Warsh is on the verge of a new interest rate hike campaign. Investors now expect Warsh to raise rates, a move that would contradict the desires of the president. The central bank's credibility is currently at stake as leadership manages the tension between persistent inflation and market performance.

   Why it matters

   August inflation remained at 3.4 percent due to fuel costs, contradicting previous beliefs that the hiking cycle had ended. This puts the Federal Reserve in a position where it must choose between fighting inflation and maintaining market stability.

   Still unconfirmed

   • The Federal Reserve is likely starting a new rate hike campaign.
   • Wall Street expects Kevin Warsh to raise interest rates and disappoint the president.
   • The central bank's credibility is on the line.

   What to watch next

   • Official Federal Reserve announcement on interest rate changes
   • The next consumer price index report
   Sources used for this update (4)

   1. seekingalpha.com — Stocks Rallied Facing A Fed Hike Decision, Here's What It Means
   2. www.fool.com — Inflation is running hot, and so is the market
   3. www.ms.now — Trump’s new Fed chairman is all but certain to disappoint him
   4. finance.yahoo.com — Will crypto’s biggest bill finally clear the Senate?
   confidence 70%
2. 3d ago

   Fed Chair Kevin Warsh Faces Pressure After Hot Inflation Data

   US inflation held steady at 3.4 percent in August driven by persistent high fuel prices, defying Wall Street expectations and setting up potential Federal Reserve interest rate action. Federal Reserve Chairman Kevin Warsh faces intense pressure following the hot consumer price index report. Market observers warn that Warsh faces a difficult choice and that his strategy risks sparking unproductive market volatility. Investors previously believed the central bank hiking cycle had finished, but the latest data leaves leadership with little room to maneuver.

   Why it matters

   Market consensus had anticipated an end to the Federal Reserve rate hiking cycle before the recent consumer price index release. The persistence of 3.4 percent inflation complicates monetary policy decisions and forces officials to weigh further tightening. Analysts are scrutinizing whether leadership will follow through with actions to curb price pressures or risk losing policy credibility.

   What is confirmed

   • US inflation held steady at 3.4% in August as high fuel prices persist.
   • Wall Street previously thought the hiking cycle was over before hot inflation data emerged.

   Still unconfirmed

   • Kevin Warsh's Fed strategy risks unproductive volatility in markets, according to Jan Hatzius.

   What to watch next

   • Federal Reserve announcements regarding interest rate decisions in response to the August consumer price index report
   • Further commentary and strategy adjustments from Fed Chairman Kevin Warsh
   • Market reaction to potential rate hike pressures and persistent fuel price trends
   Sources used for this update (7)

   1. Financial Times — US inflation held steady at 3.4% in August as high fuel prices persist
   2. CNBC — Analysis: Hot inflation data sets up a Fed rate hike. What happens if Warsh wavers
   3. The Economist — The choice facing the Federal Reserve
   4. Bloomberg.com — Fed Chairman Warsh Faces Pressure to ‘Put Up or Shut Up’ After Hot CPI Report
   5. Fortune — Wall Street thought the hiking cycle was over. Now Kevin Warsh has his ‘back against the wall’
   6. Financial Times — Why Warsh is starting to bite back
   7. Yahoo Finance — Kevin Warsh's Fed strategy risks 'unproductive volatility' in markets: Jan Hatzius
   confidence 90%