Fed Chairman Kevin Warsh (at least he’s not calling himself “Chair”) gave a dour speech at the Jackson Hole Symposium last month.
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Most of the financial press characterized it as “Hawkish,” meaning he seemed obsessed with inflation. Today the hawk hunted; the Federal Reserve just raised rates by 25 basis points to target range of 3.75% to 4%.
Is Warsh going to be a disappointing appointment for President Trump?
The hike is intended to quell inflation, but much of that is due to geopolitical events that the Fed can’t control. Higher rates won’t solve the oil problem, which is the major contributor to higher inflation (especially diesel, which is used in so much commerce logistics). But they will adversely affect affordability, as rising rates will filter down to consumers’ bills, especially housing.
In his long, dreary, Jackson Hole speech, Warsh barely mentioned the strains on the housing market, such is his obsession with inflation. Of course it is somewhat stubborn — we are winning a crucial war against Iran. Importantly, thanks in part to AI, our productivity is improving. Higher productivity will tend to restrain inflation in the long run.
When the previous “Chair” (he’s an effeminate wussy who seems to lack testosterone) stubbornly refused to lower rates, President Trump called him “Too Late Powell.” Now we are stuck with hawkish Warsh. This seems absurd: prior to the 2024 elections, “Too Late” lowered interest rates. Now, prior to the 2026 Midterms, hawkish Warsh has increased them.
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In addition to his fixation with inflation, what is annoying about Warsh is his pretense that the Fed’s monetary machinations are isolated from market sentiment. He intends to reduce guidance and discourage investors from relying on the Fed when making trading decisions. That will only create more confusion, as market participants are always looking for an edge. They will read the tea leaves, regardless, so it’s best to be transparent for all. The Fed already acts high and mighty in their fancy sanctuaries, so keep the curtain open so we can hold them accountable.
President Trump cannot easily fire Federal Reserve officials. The Supreme Court even blocked him from firing Fed Governor Lisa Cook — for now. The Federal Reserve Act severely restricts the president’s authority to remove incumbents. Mostly, it must be for cause (e.g., malfeasance, neglect), not interest rate policy disagreements. Underpinning this is the notion that the Fed is an independent body. Is it really? This Forbes article persuasively argues “no!”
Recently, President Trump urged Warsh to “get smart” and cut rates. Instead, he got dumb, and raised them. Now, the stock market is tanking — the Dow is plummeting over 800 points as I type. The courts would likely block efforts to disenfranchise Warsh, but sometimes the process is more important than the end result. Therefore, President Trump should publicly shame Warsh for his disobedience. That’s better than his other alternative, which is to cut off trade with countries that have a trade surplus with us.
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Image: Federal Reserve