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Supporting the Fed's Cautious Stance: Rate Hikes Needed to Tame Stubborn Inflation

Published July 28, 2026 at 12:03 PM UTC

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Inflation remains above the Fed's 2 percent target, and premature rate cuts could rekindle price pressures. The labor market is still tight, with unemployment near historic lows, suggesting the economy can withstand higher rates. History shows that easing too early can lead to persistent inflation, as seen in the 1970s. Warsh's position is responsible: protecting the Fed's credibility and independence from political pressure is crucial. Trade uncertainty is a reason to be cautious, but it does not justify cutting rates when inflation is not yet conquered. A hold or even a hike would demonstrate the Fed's commitment to price stability, which ultimately supports long-term economic health.