Traders expect the Federal Reserve to raise interest rates today for the first time since 2023. Fed Chair Kevin Warsh and the rest of the FOMC wrap a two-day meeting this afternoon. The rate decision lands at 2 p.m. Eastern, and Warsh holds a press conference at 2:30. As of this morning, traders were pricing a 92.7% chance of a quarter-point hike, which would push the Fed's benchmark rate to 3.75%-4.00%. President Trump nominated Warsh in January and has spent weeks publicly pushing the Fed toward cuts, not hikes. Warsh's own signals point the other way.

Warsh Says The Data Leaves Him No Choice

He's already told everyone where he stands — the only question was whether he'd follow through.

Warsh committed himself before the meeting even started. At a high-profile speech last month, he said of inflation still running well above the Fed's target: "We have work to do." Economists took it as a promise. He's also facing pressure from inside his own committee. Three regional bank presidents dissented at the last meeting in July; they wanted a hike then, not later. Cato Institute economist Jai Kedia says the Fed already waited too long to start raising rates. Northeastern's William Dickels warns the problem can get worse than that: once people expect inflation, that expectation itself becomes self-fulfilling — the same mechanism that drove double-digit inflation in the 1970s.

The White House Is Bracing For It, Not Fighting It

Trump wanted cuts. His own advisers are now selling the hike as proof Warsh takes orders from no one.

The administration just reversed course. For weeks it campaigned publicly for lower rates: Treasury Secretary Scott Bessent floated a half-point cut on Bloomberg TV, and Trump himself said over the weekend that America "should be paying the lowest interest rate in the world." But heading into today's meeting, White House economic adviser Kevin Hassett changed the message: "I'm sure he's not going to be super happy about it, but he will defend the independence of Kevin Warsh above all." On CNN the same day, Hassett said Trump "100% respects the independence of Kevin Warsh."

But The Labor Market Is Already Cracking

Some Fed officials and economists say tightening now risks tipping a weakening economy into recession.

Not everyone thinks a hike is the safe move. Chicago Fed President Austan Goolsbee and Philadelphia Fed President Anna Paulson have both counseled patience over tightening. Fed Governor Christopher Waller said before August's inflation report that he'd likely back holding rates steady, warning only that "it may not take much acceleration in inflation" to change his mind. KPMG's chief economist, Diane Swonk, says the Fed is stuck either way: restore faith in its inflation target and borrowing costs can ease, or fail and watch mortgage rates climb regardless. They're already climbing. The 30-year mortgage rate crossed 7% this month for the first time in 16 months, and the Fed hasn't even moved yet.

Where This Lands

Warsh has all but promised a hike, and the market believes him. The administration spent weeks demanding cuts and has now pivoted to calling a hike proof that Warsh answers to no one, Trump included. Inside and outside the Fed, another camp is warning that raising rates into a softening job market is exactly the wrong moment to do it. All three get their answer this afternoon.

Sources