Opinion: Federal Reserve Chair Worrh faces a dual challenge—containing inflation while balancing the pressure from Trump to cut interest rates.

ME News message: On May 17 (UTC+8), FOX reporter Charles Gasparino wrote that the newly appointed Federal Reserve chair, Kevin Wirth, faces two challenges right at the start of his tenure—persistent inflation that continues to run high, and pressure from Trump to cut interest rates. The annualized consumer inflation rate has risen to 3.8%, the highest since May 2023. The Iran war has been the main driver pushing up energy prices. Last week, the increase in wholesale prices was even greater than the increase on the consumer end. On Friday, the futures market began incorporating within-year rate hikes into pricing; prior bets/expectations of rate cuts had essentially faded.

Wirth himself is a firm inflation hawk. After leaving the Fed in 2011 to take up an academic post, he repeatedly wrote in opinion pieces criticizing the “easy/loose monetary” regime in the era of Bernanke, Yellen, and Powell, and urged a more “restrained” policy stance to shrink the Fed’s balance sheet. He believes that the Fed’s years of easing policies are the root cause of the current inflationary pressures. However, given high inflation, his room to cut rates is extremely limited.

Meanwhile, inside the Federal Reserve’s interest-rate decision-making committee, there is no longer a unified front. Former Chair Powell—replaced by Trump—still retains voting rights as a member. Powell said he will not leave until the investigation into the costs of constructing the Fed’s new headquarters, after the dust settles; that investigation was initiated by Trump and had previously once delayed Wirth’s appointment. Trump has appointed Wirth while also pushing for rate cuts. But if Wirth were to follow through on what he wants, 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 “stagflation” of the 1970s. (Source: BlockBeats)