Donald Trump appointed Kevin Warsh to lead the Federal Reserve with expectations
of lower interest rates, but investors increasingly fear the Fed may instead
need to raise rates as inflation, bond yields and energy prices climb. The Iran
war, elevated oil prices and strong AI-driven demand have complicated prospects
for rate cuts. Treasury Secretary Scott Bessent said current inflation pressures
are “transient,” while White House economic adviser Kevin Hassett predicted rate
cuts later this year. Analysts remain divided, with BNP Paribas economist James
Egelhof saying Trump’s comments broadened expectations toward hikes, while
Standard Chartered’s Steve Englander expects rates to remain unchanged through
2027. Joseph Lavorgna of SMBC Americas said the Fed may need to raise rates by
about one percentage point due to inflationary pressures linked to the Iran
conflict.
