The Federal Reserve has a new sheriff, and he’s not here to make friends. Kevin Warsh, sworn in as Fed Chair on May 22, held his first FOMC meeting on June 17 and kept the benchmark interest rate steady at 3.5-3.75%. That sounds like a neutral move. It wasn’t.
Look, holding rates steady when the Consumer Price Index is running at an annualized 4.2%, the highest in three years, is the monetary policy equivalent of loading a gun without pulling the trigger. Warsh’s post-meeting remarks made clear that the trigger pull is very much on the table.
The Warsh doctrine takes shape
Warsh served on the Fed Board of Governors from 2006 to 2011, a period that included the global financial crisis and its aftermath. President Donald Trump nominated him for the top job precisely because of what he did during that tenure: he became one of the most vocal hawks in the room.
His central thesis is straightforward. The Fed made catastrophic errors that allowed inflation to spike to 9.1% year-over-year at its 2022 peak, and those errors need to be corrected with something he’s called a “regime change” in how inflation is measured and communicated.
