The Federal Reserve has a new boss, and Wall Street is already bracing for turbulence. Morgan Stanley analysts are warning that Kevin Warsh’s first policy meeting as Fed Chair, scheduled for June 16-17, could send shockwaves through foreign exchange markets and upend the carry trades that have been a reliable profit engine for currency traders.
A new sheriff with a different playbook
Warsh, who was confirmed by the Senate in a razor-thin 54-45 vote on May 13, was sworn in on May 22. That confirmation margin is one of the closest for a Fed Chair in modern history.
Warsh served as a Fed Governor from 2006 to 2011, meaning he was in the room during the 2008 financial crisis. Before that, he worked at Morgan Stanley from 1995 to 2002, which adds a layer of irony to his former employer now sounding the alarm about his potential market impact.
Warsh has been vocal about wanting to scale back forward guidance, the practice where the Fed essentially telegraphs its next moves to give markets time to adjust. He also wants to reduce the frequency and detail of press conferences.
