The Fed isn’t expected to raise rates today, but Chair Warsh’s comments at this afternoon’s press conference could still upset the apple cart.

The Fed’s job is to keep inflation in check. The problem is that much of today’s inflation is tied to the Iran conflict and the oil price spike that came with it. Higher interest rates can’t lower the price of oil or end a conflict overseas. So what’s a Fed to do?

Some Fed members still lean toward raising rates. Their worry is that if prices stay high long enough, higher inflation becomes “baked in.” Businesses keep raising prices, workers push for bigger raises, and inflation feeds on itself. To them, a rate hike signals that the Fed won’t let that happen.

The other side of the argument: raising rates now means hitting consumers twice. They’re already paying more at the grocery store and the gas pump, and a hike would add higher borrowing costs on top of that, including mortgages. Using a tool built to cool demand on a problem caused by supply is confusing at best.

What it means for mortgage rates: The Fed doesn’t set mortgage rates directly, but the tone of today’s press conference matters. If Warsh sounds ready to hike, bond yields could rise and mortgage rates with them. If he sounds patient, the gains we’ve held this week could stick.

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