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[Wash's Stance May Be More Crucial Than the Rate Hike Itself] ⑴ The Federal Reserve is expected to raise interest rates for the first time since 2023 on Wednesday. This decision, driven by persistently high inflation and rising global borrowing costs, will draw close attention to how Fed Chairman Warsh describes his first monetary policy shift under his tenure. ⑵ The rate hike contradicts Trump's expectations when nominating Warsh to lead the Fed. He had previously stated that he expected his nominee to cut rates and recently threatened to impose new import tariffs if the Fed did not lower borrowing costs. ⑶ However, a 25 basis point increase in the policy rate to 3.75% to 4.00% is almost a certainty, as inflation appears to remain stuck above the 2% target, long-term global borrowing costs are rising, and Warsh faces questions about his willingness to defy Trump's demands. ⑷ The pressing issue now is how Warsh will frame this policy decision and whether global bond investors will see it as a credible response to inflation, which has been above the target for more than five years and has risen since the start of Trump's current term. (5) Some economists say that a rate hike coupled with unanimous voting would be a strong signal, especially if accompanying economic forecasts indicate policymakers expect another rate hike this year, and perhaps another in 2027. (6) This economist believes Warsh's remarks at Jackson Hole last month are in line with the current situation, namely that if inflation does not fall at a sufficient pace, more work needs to be done. (7) The challenging scenario is if Warsh sounds dovish, saying this is just a minor adjustment, the market will react poorly. (8) The Federal Reserve will release its monetary policy statement and updated quarterly economic projections at 2:00 AM Beijing time on Thursday, including officials' estimates of the appropriate policy rate at the end of the year. (9) In the projections released in June, 9 of the 19 officials believed that interest rates would need to rise by at least 25 basis points by the end of 2026, and 9 believed they could remain unchanged or fall by 25 basis points. Warsh himself did not submit a projection. (10) Support for rate hikes continued to accumulate thereafter. At the July 28-29 meeting, three policymakers dissented in favor of a rate hike, and several others subsequently stated that they were prepared to raise rates unless inflation showed signs of slowing down soon. (11) Inflation did not slow down. The Fed's personal consumption expenditures price index, which targets the 2% growth rate, rose 3.7% year-on-year in June and July, and the data released on September 30 was expected to show little change. (12) Although many economists still believe that inflationary pressures may eventually ease, the recent rise in oil prices above $100 per barrel, Trump's new tariffs on Canada and threats of further import taxes, and continued economic growth driven by the surge in artificial intelligence spending have led Fed officials to believe that the risks are significant enough to warrant action.