WASHINGTON (AP) — Barely four months into the job, Federal Reserve Chair Kevin Warsh is stuck between two strong and opposing forces: Financial markets that anticipate the central bank will raise interest rates, and President Donald Trump, who wants the Fed to cut them or leave them unchanged.
Economists expect that on Wednesday, Warsh and his fellow policymakers will side with the markets.
Warsh, economists say, has largely boxed himself into a rate hike after delivering a high-profile speech last month warning that inflation remains too far above the Fed's 2% target and might require higher borrowing costs to bring it down. A report last week showing inflation is still stubbornly high largely sealed investors' expectations.
Warsh has faced this dilemma before. Soon after becoming chair May 22, he delivered tough rhetoric on inflation, but in late July the central bank left its key rate unchanged. After he provided little explanation for his decision at a press conference, investors pushed up longer-term interest rates, accelerating a process that is still ongoing. This week, the rate on the 10-year Treasury bond reached 5% for the first time in three years. Mortgage rates, which closely follow the 10-year Treasury, have also risen.
If the Fed doesn't hike its key rate Wednesday, it risks a replay of what happened in late July, economists say. When investors expect inflation to stay high, they demand higher interest rates on government and corporate bonds to compensate.
“That is the paradox: A hike now could lower long-term rates later,” Diane Swonk, chief economist at KPMG, wrote in an email. “Restore faith in the 2% target, then the inflation premium can fall. Fail, and markets will tighten instead through higher mortgage rates, business borrowing costs and interest on the debt.”
A quarter-point rate increase would be the first in three years and push the Fed's benchmark rate to about 3.9%.
While campaigning for the top job last year, Warsh said the Fed could lower interest rates. But since getting the nod, the Iran war has sharply raised gas prices, lifting inflation to 3.7% in July, according to the Fed's preferred measure. In April 2025, before Trump's tariffs, it had fallen to 2.3%.
Core inflation, which excludes the volatile food and energy categories, was 3.3% in July, up from 3% just before the Iran war.
If the Fed forgoes a rate hike, it would risk being seen as giving in to pressure from the White House, which could undercut its credibility with financial markets.
“Kevin cares about his legacy," said Kristin Forbes, an economics professor at MIT's Sloan School and former policymaker at the Bank of England. "And he knows that Fed chairs who follow political pressure instead of the economy do not go down well in the annals of history.”
Trump harshly criticized Warsh's predecessor, Jerome Powell, for not cutting rates quickly enough. His Justice Department even launched a criminal investigation into Powell over brief testimony he delivered to Congress last year, though that probe was eventually dropped.
Kevin Hassett, Trump's top economic adviser, was asked in an interview with Fox News on Sunday how Trump might react to a rate hike.
“I’m sure he’s not going to be super happy about it, but he will defend the independence of Kevin Warsh above all,” Hassett said.
Warsh might also have a measure of protection from the fact that his father-in-law is Ronald Lauder, a friend of Trump's and a billionaire donor to his campaigns.
Even if Warsh decides to support a rate hike, it's not clear how many more will follow. It's unusual for the Fed to change rates just once. Typically the central bank embarks on a series of hikes or rate cuts to push the economy in the direction it seeks.
There is one precedent for a single hike: In 1997, former chair Alan Greenspan lifted rates by a quarter-point in March of that year. Yet a financial crisis ignited in Asia that July, prompting the Fed to remain on hold. When the crisis worsened in 1998, the Fed ultimately cut rates three times that fall.
For now, Wall Street investors anticipate the Fed will hike three times, with additional increases in December and March.
But Jonathan Pingle, an economist at UBS, said it is possible that if future inflation data showed price increases cooling, the Fed could forgo more hikes.
“They don't have to follow through on that if the data goes their way,” Pingle said.
On Wednesday, the Fed will provide some hints about its next moves when it releases its quarterly economic projections, which will include a forecast of where its benchmark rate will be at the end of this year and next.
Federal Reserve Board Chairman Kevin Warsh attends an observance ceremony on the 25th anniversary of the 9/11 attacks, Friday, Sept. 11, 2026, at the Pentagon in Washington. (AP Photo/Mark Schiefelbein)
The clock is ticking toward an unusual deadline in the NHL, and teams with players relevant to it are rushing to beat the final horn.
The new collective bargaining agreement goes into effect at midnight, at which time a seven-year contract will be the longest a player can re-sign with his own team — and six years in free agency. The final eight-year deals are getting done Tuesday.
Washington locked up Ryan Leonard for $84 million starting with the 2027-28 season. Making an average of $10.5 million a year through 2035, he will match new Capitals teammate Alex Tuch, who also got eight years in a sign-and-trade with Buffalo, for the highest-paid player on the team when Leonard's new deal kicks in.
“Ryan is a young and talented player who is still years away from entering his prime, and we believe he has tremendous potential to continue growing into an important player for our organization,” general manager Chris Patrick said in announcing Leonard's contract. “While reaching his full potential will take time, we have been impressed with his work ethic and the way he continues to develop his game. We are confident in Ryan’s ability to continue improving as a hockey player, and we believe this agreement provides him with the opportunity to grow and develop within our organization, while giving us the ability to keep a talented young player in our lineup for years to come.”
Leonard, a 21-year-old winger, is going into his second full NHL season after breaking in during the spring of 2025. This contract cements his place as part of the Capitals' young, post-Alex Ovechkin core, which is expected to also include brothers Ilya and Aliaksei Protas.
Washington forward Justin Sourdif also got an eight-year extension before the deadline: $50.8 million, for an annual cap hit of $6.35 million. Sourdif will be 25 when it goes into effect.
“Justin is a good young forward who has continued to develop steadily throughout his career,” Patrick said. “He is versatile and demonstrated his ability to play an important forward role for our team whenever the opportunity arose last season. ... We believe he has a bright future ahead of him and are confident that he will continue to make valuable contributions to our organization in the coming years.”
Ottawa signed Drake Batherson for $86 million, which is the most lucrative contract in Senators history. The previous record was Tim Stützle's eight-year, $66.8 million extension from September 2022.
Batherson will count $10.75 million against the salary cap starting in 2027, surpassing Stützle’s $8.35 million. He'll be 29 at that point.
“He was drafted and developed by our organization and has shown a commitment to wanting to be in Ottawa long term,” GM Steve Staios said of Batherson. “We view him as a key part of our core group.”
Batherson has set career highs in scoring each of the past seven seasons, topping out at 71 last year. He is just the second player in league history to do that seven times in a row, joining Vic Stasiuk from 1953-54 to '59-60 with Detroit.
Since the NHL and the NHL Players' Association came to an agreement on this CBA in late June 2025, 33 players have signed eight-year contracts. Twelve of those have come in the past three months, including Colorado's Cale Makar setting the record for the most money at $163.2 million.
After being flat or nearly flat coming out of the pandemic, the salary cap is the middle of a series of record increases, now that revenues have caught up and are skyrocketing. The cap went from $95.5 million last season to $104 million this season and will be $113.5 million in 2027-28, when most of these new contracts will go into effect.
Philadelphia signing Anaheim’s Leo Carlsson to an offer sheet in July that made him the highest-paid player in the sport at $18 million a year — which the Ducks matched to keep him — led to a spike in salaries this summer.
Vegas center Jack Eichel, who is now making $13.5 million on his long-term contract signed last October, said agent Pat Brisson told him about what was coming and they had talks with NHLPA executive director Marty Walsh and others at the union and decided to go the full eight years anyway.
“It’s an incredible deal for me and my family, and we’re super grateful for the organization and the city believing in us,” Eichel said last week. “There’s no signer's remorse. Yeah, I'm a happy guy.”
Eichel led the Golden Knights to the Stanley Cup in 2023. He and fellow standouts such as Makar, Minnesota's Kirill Kaprizov, and Florida teammates Sam Bennett and Aaron Ekblad are proven commodities.
Many of the young players getting eight-year deals this offseason are team gambles of varying degrees.
As recently as Monday, Buffalo signed 22-year-old center Noah Ostlund for $52.8 million, banking on his potential. Ostlund has played in just 71 games in the league thus far.
Pittsburgh signed Ville Koivunen for $32 million over eight years in August. He has 14 points in 42 career games.
Beginning Wednesday, no contract can have more than 60% paid in signing bonuses. New Jersey and defending champion Carolina each got a deal done just in time.
The Hurricanes signed captain and Conn Smythe Trophy winner as playoff MVP Jordan Staal to a one-year extension, while the Devils extended recently acquired forward Luke Evangelista for five years and $36.25 million. Staal's contract is worth $900,000 in salary, with a $4 million signing bonus and up to $5.1 million in additional performance incentives.
“Jordan is not only our captain, he’s the bedrock of the culture we’ve established in this organization,” GM Eric Tulsky said. “His leadership and on-ice performance throughout last season and especially in the playoffs was a primary factor in bringing the Stanley Cup back to Raleigh.”
See AP’s full NHL coverage here
FILE - Ottawa Senators' Drake Batherson (19) celebrates his goal against the Carolina Hurricanes with teammate Nick Cousins (21) during the second period of an NHL hockey playoff game in Ottawa, Ontario, April 23, 2026. (Justin Tang/The Canadian Press via AP, File)
FILE - Washington Capitals right wing Ryan Leonard (9) in action during the third period of an NHL hockey game against the Utah Mammoth, March 3, 2026, in Washington. (AP Photo/Nick Wass, File)
