Opinion: U.S. Federal Reserve’s newly appointed chair, Wosch, faces the dual challenge of inflation and balancing the 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 Wosh, faces two challenges right at the start of his tenure: persistent inflation that continues to run hot and pressure from Trump to cut interest rates. Consumer inflation’s annualized rate has risen to 3.8%, the highest since May 2023. Soaring energy prices driven by the Iran war are the main drivers. Last week, wholesale prices rose even more than consumer prices. On Friday, the futures market began incorporating year-ahead rate hikes into pricing, and expectations of rate cuts had largely faded beforehand.

Wosh himself is a staunch inflation hawk. After leaving the Federal Reserve in 2011 to take up an academic role, he has repeatedly written in opinion pieces criticizing the “easy monetary” regime in the eras of Bernanke, Yellen, and Powell, advocating for shrinking the Fed’s balance sheet through a more “restrained” policy stance. He believes that the Fed’s years of easing policies are precisely the root cause of the current inflationary pressure. However, in the face of high inflation, his room to cut rates is extremely limited.

At the same time, the Fed’s interest-rate decision-making committee is no longer united. Powell, the former chair replaced by Trump, still retains voting rights as a board member. Powell said he would not leave until the dust settles on the investigation into the costs of building the Fed’s new headquarters—an investigation launched by Trump that had previously at one point delayed Wosh’s appointment. Trump is appointing Wosh while also pressuring for rate cuts. But if Wosh were to grant Trump’s wishes, it would directly contradict the policy position he has consistently advocated. The Iran war has entered its third month, and the direction of events remains unclear; once oil prices break through $200 per barrel, the U.S. economy could face a risk similar to the 1970s’ “stagflation.” (Source: BlockBeats)