



The Fed’s hawkish turn poses problems for Warsh. What it means for rates.
Subscribe to enjoy similar stories. Every incoming Federal Reserve chair inherits an economy. Kevin Warsh, President Donald Trump’s pick to next run the central bank, will also inherit a conflict.
The White House expects the Fed to lower interest rates, while the policymakers that Warsh may soon lead have just signaled that further easing is unlikely without firmer proof that inflation is under control. Inside the Fed, the mood has turned hawkish, indicating a bias toward more restrictive monetary policy. Minutes from the January meeting show broad agreement around holding the federal-funds rate at 3.50% to 3.75% for some time, following last year’s three rounds of easing.
But several participants noted that they would have preferred language that kept rate hikes explicitly in play, should inflation remain above target. Officials assessed that downside risks to employment had moderated, while the risk of inflation proving more persistent still loomed. “This sets up an interesting dynamic," says EY-Parthenon Chief Economist Gregory Daco.
“While Warsh may enter with a perceived dovish bias, he will first need to demonstrate that his views are anchored in economic fundamentals rather than politics. He would then need to persuade a committee that appears increasingly hawkish and comfortable with policy near neutral." The economic data have given officials little reason to hurry. Payrolls rose by 130,000 in January and the unemployment rate edged down to 4.3%.
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