Federal Reserve Chairman Kevin Warsh is unlikely to push for an interest rate hike at this week's policy meeting for at least three key reasons. First, Warsh himself does not agree with the current logic supporting a rate hike; second, a hasty rate hike would undermine the research value of his special task force; and third, a rate hike could embroil him in a thorny political conflict with the Trump administration. Meanwhile, there is significant disagreement within the Federal Open Market Committee (FOMC). Of the twelve voting members, approximately three to four favor an immediate rate hike. According to data from the CME FedWatch Tool, investors believe there is a close to a 40% probability of a rate hike this week. Warsh faces considerable obstacles in securing an outcome that keeps interest rates unchanged at the meeting. Therefore, how he articulates these three considerations will send crucial policy signals. First, Warsh does not currently want to raise interest rates, and he has never made any policy commitments. He has explicitly stated his intention to end forward guidance—the Fed's practice of pre-setting interest rate paths. This means he will not reveal his voting preferences at FOMC meetings in advance. However, Warsh has already released clues demonstrating his so-called policy response function, i.e., how the Fed interprets economic data and adjusts its policies accordingly. Regarding the two major variables currently impacting the US economy: the Iranian conflict driving up energy prices and large-scale corporate investment in artificial intelligence pushing up semiconductor and electricity costs, Warsh has outlined his data-driven judgment framework. Following the collapse of the US-Iran ceasefire agreement, gasoline and diesel prices have recently surged. At his Senate hearing on July 15, Warsh expressed a relatively nonchalant attitude: "Price shocks to specific commodities are often beyond our control." In other words, in the short term, the Fed cannot increase the already fully operational US refining capacity. Inflation risks will only truly warrant attention if energy price increases spread across all sectors. However, the June CPI data released shortly before Warsh's hearing showed that overall prices had already begun to decline before the new round of conflict erupted. Some of his colleagues at the Federal Reserve warned that the massive investment by tech companies in artificial intelligence could drive up prices for a range of commodities, including semiconductors and electricity. However, similar to the energy issue, Warsh told the Senate that he didn't need to be overly concerned. He argued, "A single price change doesn't necessarily trigger inflation; the supply side will adjust spontaneously." Warsh stated that the Fed needs to clarify whether this round of supply and demand changes constitutes the type of inflation that must be addressed by raising interest rates. In other words, the policy response logic of the current FOMC under Warsh's leadership will become clearer after this meeting. The second point is closely related to the first. Warsh has established a series of special working groups, with reports to be released gradually from the end of 2026 onwards. The core objective is to systematically answer these kinds of macroeconomic questions: Can artificial intelligence accelerate economic growth without pushing up prices? Is the Fed's current framework for analyzing inflation reasonable? Special working groups have been established for both of these major questions. If Warsh votes in favor of raising interest rates at his second FOMC meeting as chairman, it would be tantamount to directly negating the research significance of the working groups. The very establishment of these working groups is to accumulate political capital needed for policy adjustments. Waiting and observing for now, and buying time, is more conducive to Warsh's subsequent progress towards his reform goals. One of the working groups also focused on the Fed's communication mechanism, including how often the Fed should hold press conferences. This is another reason why he cannot rush into a decision to raise interest rates. Conversely, if Warsh unexpectedly announces a rate hike, it will be a strong signal that, in his view, the current inflation situation and the risks to the Fed's credibility are severe enough to warrant sacrificing his signature reform initiatives. The third constraint comes from direct political reality. Warsh has repeatedly emphasized publicly that interest rate decisions will be made independently, without being influenced by President Trump's opinions. But this does not mean he can completely ignore Trump. Warsh hopes to gain more allies within the Fed Board. The next window for personnel changes will wait until former Chairman Jerome Powell leaves the Board. Powell's term as a governor was originally intended to last until January 2028; however, if the Fed Inspector General's investigation into the cost overruns of the Fed building renovation project concludes that there was no fault on his part, and the Trump administration's Department of Justice does not pursue the matter further, Powell may leave earlier. Warsh says the investigation report will be released this summer. After the report is released, Powell is likely to choose to resign. However, this depends on whether Trump can restrain his impulse to escalate tensions, which seems unlikely at present. Trump publicly stated on Monday that he wants interest rates lowered, while also pointing to internal resistance within the Federal Reserve Board. "You also need permission from some people, and these people may have ulterior motives," he said, alluding to Powell. The political maneuvering involved is very subtle. Warsh must avoid giving Trump an excuse to attack Powell. A rate hike this week would confirm conspiracy theories circulating in conservative circles—as Treasury Secretary Scott Bessant stated, Powell remains a "shadow Fed chairman." Even if Powell resigns after the Inspector General's report, Warsh hopes to have a say in the selection of his successor; however, the nomination power is in Trump's hands. Warsh cannot completely ignore the president's demands. At this policy meeting, Warsh may release clues about the Inspector General's investigation report; in addition, there is another external investigation reviewing the Fed's handling of the 2023 banking crisis. Many worry that this external investigation report could be used as an excuse to remove members of the Board. The Fed's final decision cannot be accurately predicted at this time, primarily because the Fed's policy outcome is no longer predetermined. Warsh will eventually need to implement his first rate hike during his term. However, for now, he has ample reason to wait and see for a while longer.