Chair Kevin Warsh is facing his first major test since taking the helm of the US Fed.
Most investors still expect the Fed to leave interest rates unchanged on Wednesday. However, expectations for a surprise rate hike have been building, with markets pricing around a 30%–40% chance of an increase.
Former Kansas City Fed President Esther George has suggested the decision is essentially a coin toss, while Citadel Securities is among the firms expecting a 25-basis-point hike.
A hike at only his second meeting would place him directly at odds with President Donald Trump, who said on Monday that interest rates should be lowered.
Warsh has repeatedly said he will make interest rate decisions independently of political influence.
A hawkish hold may ultimately prove the middle ground. Allowing the Fed to keep rates unchanged while signalling that a hike remains firmly on the table.
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