Warsh seeks to keep Fed steady amid Iran price pressures, internal divides

The Federal Reserve is poised to hold interest rates steady Wednesday, even as persistent inflation raises pressure on the central bank and its relatively new chair.

Fed Chair Kevin Warsh heads into the second rate-setting meeting of his tenure grappling with a complicated economic picture, as the war with Iran rages on once again following a brief pause in hostilities.

The short-lived ceasefire with Tehran helped ease consumer prices in June. But after a resurgence of strikes, the price of oil has climbed again, threatening to erode last month’s improvements and fracture support at the central bank for keeping rates at their current level.

“The new chairman, Kevin Warsh, is expected to leverage the uncertainty surrounding the demand destruction associated with the war in Iran to hold the line in July,” Diane Swonk, KPMG’s chief economist, wrote in an analysis Friday.

“The leadership of the Fed stood with him in June to underscore the Fed’s independence from political interference; that solidarity is fraying,” she continued.

The Federal Open Market Committee (FOMC), the 12-member panel in charge of setting rates, held rates steady at a range of 3.5 percent to 3.75 percent at Warsh’s first meeting in June. It was a unanimous vote, marking a shift from May’s divided decision.

But this unity may not last. David Mericle, chief U.S. economist at Goldman Sachs, suggested in a note Sunday that “there will likely be at least one dissent in favor of a hike.”

Lorie Logan, president of the Federal Reserve Bank of Dallas, said earlier this month that she supported “modestly higher interest rates,” arguing that “one month of relief” in prices is “not enough.”

The consumer price index (CPI), one popular measure of inflation, eased up in June amid the ceasefire with Iran, dipping to an annual rate of 3.5 percent. Just one month earlier, inflation hit........

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