Opinion: The new Federal Reserve Chair, Wosh, faces the dual challenge of inflation and balancing pressure from Trump to cut interest rates

ME News message. On May 17 (UTC+8), FOX reporter Charles Gasparino posted that the newly appointed Federal Reserve Chair Kevin Wirth faces a dual challenge right at the start of his tenure: persistently rising inflation and pressure from Trump to cut interest rates. Consumer inflation’s annualized rate has risen to 3.8%, the highest since May 2023, with the Iran war pushing up energy prices as the main driver. Last week, wholesale prices rose even more than consumer prices. On Friday, the futures market began factoring in year-ahead rate hikes; expectations for rate cuts had largely faded beforehand.

Wirth himself is a firmly pro-inflation “hawk.” After leaving the Fed in 2011 to take an academic role, he has repeatedly written in the opinion section criticizing the “loose monetary” regime of the Bernanke, Yellen, and Powell eras, urging a more “restrained” policy to shrink the Fed’s balance sheet. He believes that the Fed’s years of easing policies are the root cause of the current inflation pressure. However, in the face of high inflation, his room to cut rates is extremely limited.

At the same time, the internal consensus within the Federal Reserve’s interest rate decision-making committee is no longer unified. Former Chair Powell, who was replaced by Trump, still retains voting rights as a board member. Powell said he will not leave until the dust settles from the investigation into the costs of building the new Fed headquarters—which was initiated by Trump and had previously once delayed Wirth’s appointment. Trump appointed Wirth while also pressuring for rate cuts. But if Wirth were to follow through on his wishes, it would directly contradict the policy stance he has consistently advocated. The Iran war has entered its third month, and the situation remains unclear; once oil prices break through $200 per barrel, the U.S. economy could face risks similar to the 1970s “stagflation.” (Source: BlockBeats)