Inflation Is Surging, Trump Wants Rate Cuts -- and Kevin Warsh Is Caught in a Market-Moving Crossfire
Written by Keith Speights for The Motley Fool -> Inflation is rising with the consensus among economists predicting a CPI of 6% in the second quarter of 2026. Normally, the Fed wouldn't consider a rate cut with resurging inflation. However, President Trump seems likely to exer
Inflation is rising with the consensus among economists predicting a CPI of 6% in the second quarter of 2026.
Normally, the Fed wouldn't consider a rate cut with resurging inflation.
However, President Trump seems likely to exert pressure on Warsh for further rate cuts.
Smiles abounded as Kevin Warsh took his oath to serve as the newest Federal Reserve chair in the White House East Room two weeks ago. The happy expressions probably won't last long.
Inflation appeared to be under control enough for the Fed to cut rates several times in 2025. The situation has changed significantly since then. Normally, the central bank wouldn't proceed with further rate cuts amid resurgent inflation.
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However, President Trump clearly wants rate cuts. Based on his past comments, he expects loyalty from those he has nominated to serve in powerful federal positions. This puts Warsh in the middle of a crossfire. And it could rattle the stock market .
The Federal Reserve has historically sought to keep the inflation rate below 2%. Last month, the U.S. Bureau of Labor Statistics released its April inflation report, with the Consumer Price Index (CPI) coming in at 3.8%. This was the highest inflation rate since May 2023. By the way, the last time the Fed increased interest rates in July 2023, the CPI was 3%.
