Former Fed official says Warsh may face pressure to raise rates

Former Kansas City Fed President Esther George says Federal Reserve Chair Kevin Warsh may have to consider higher interest rates if inflation remains stubborn, according to Fortune. Her view points to a possible early clash between the central bank and President Trump, who has pressed for lower rates.

George, a former colleague of Warsh and a former member of the rate-setting Federal Open Market Committee, told Fortune’s Catherina Gioino that Americans making long-term financial plans should not assume borrowing costs are headed down. “If I were someone planning with that kind of horizon, I’d plan for higher rates coming ahead,” George said, according to Fortune.

Asked whether she would lower rates now, George told Fortune: “No I would not.” She said inflation remains the central issue for policymakers and suggested the Fed’s debate may shift toward whether rates need to rise.

“Inflation is a problem right now, and it’s been a problem for a while in the United States,” George told Fortune. “The real choices they’re looking at is, can we hold and see inflation fall? Are we going to have to raise rates?”

Trump’s rate-cut push faces an inflation test

Fortune reported that Trump called for rate cuts when he nominated Warsh to lead the Fed. George’s comments suggest that pressure from the White House may run into the Fed’s inflation mandate if price growth does not ease enough.

Fortune said George has been regarded as one of the more hawkish voices to serve on the FOMC. Her assessment is that the Fed may have to discuss increases rather than cuts, a position that would likely draw a negative reaction from Trump if policymakers move in that direction, according to Fortune.

The timing adds weight to Warsh’s public appearances. Fortune reported that Warsh is scheduled to speak Wednesday at a European Central Bank event in Portugal, while the U.S. government is set to release June nonfarm payrolls data Thursday.

Those labor figures could shape the next round of rate expectations. Fortune also cited a contrary view from Jason Ma that rate cuts could still come if payrolls weaken, inflation drops sharply and Warsh’s earlier hawkish stance proves more performative than predictive.

Markets weigh rates and geopolitical risk

Fortune reported that markets were mixed Monday morning as investors watched both Fed policy and tensions involving Iran. S&P 500 futures were up 0.77%, while Europe’s Stoxx 600 was flat in early trading and the U.K.’s FTSE 100 was down 0.19% before lunch.

In Asia, Fortune reported that South Korea’s KOSPI fell 0.2%, Japan’s Nikkei 225 rose 0.15%, India’s Nifty 50 declined 0.39% and China’s CSI 300 gained 1.21%. Brent crude fell to $72 a barrel from $75 the previous day, and Bitcoin traded at $59,800, according to Fortune.

For households and businesses, George’s warning is the practical takeaway: the path of rates remains tied to inflation. If her forecast is right, Warsh’s Fed could deliver a policy direction at odds with Trump’s demand for cheaper credit.

This story draws on original reporting from Fortune.