Item 1 of 2 Former U.S. Federal Reserve Governor Kevin Warsh speaks during a monetary policy conference at Stanford University’s Hoover Institution in Palo Alto, California, U.S. May 9, 2025. REUTERS/Ann Saphir/File Photo
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Investors, meanwhile, have pushed back their bets on the timing of an initial Warsh-led rate cut, to the Fed’s July 28-29 meeting from the June 16-17 gathering. Though his nomination has not been formally submitted to the Senate, Warsh is expected to be confirmed in time for the June meeting, with current Fed Chair Jerome Powell’s leadership term ending in May.
The improved outlook may be good for the economy, but it could leave Warsh in the same bind as Powell, with data and his colleagues pulling in one direction and the White House pulling in another.
“The Fed’s reaction function has shifted slightly more hawkish,” Natixis CIB economists Christopher Hodge and Selin Aker wrote in a note, concluding the central bank could only make two quarter-percentage-point rate cuts this year, rather than the three they previously expected.
MIRAN SAYS BIG DROP IN RATES STILL POSSIBLE IN 2026
The U.S. central bank’s next meeting is scheduled for March 17-18, when its policy-setting Federal Open Market Committee is expected to hold the benchmark interest rate in the 3.50%-3.75% range. New quarterly economic and rate projections also will be released at the end of that meeting.
“I really do not think that we have an inflation problem,” despite recent inflation readings a point above the central bank’s 2% target, said Miran, whose term as a Fed governor has technically expired, but who can continue to fill the job until a replacement is named. Absent some other departure from the Fed’s seven-member Board of Governors, Miran’s seat would be needed for Warsh to eventually come aboard.
WARSH FACES POSSIBLE DILEMMA
The U.S. employment report for February is due to be released on March 6.
A combination of sticky inflation, a steady unemployment rate, and continued economic growth would in many ways be a comforting outcome for the Fed. Policymakers generally agree that inflation will decline and anticipate the combination of slow job growth and low rates of layoffs will yield a roughly steady unemployment rate. As long as that outlook continues, and absent any sense that public expectations about inflation are starting to shift higher, there would be little motivation to do anything other than wait.
Such an outcome could present a dilemma for Warsh, who has laid out arguments for why rates should fall and now will have to contend with a strong-willed and publicly demonstrative president who has taken the Fed chief nominee at his word. Trump said earlier this month that he had not asked Warsh to lower rates, but felt it was clear what his nominee would do.
Trump has clashed with Powell repeatedly over the president’s demands for deep rate cuts, but said of Warsh last month: “I don’t want to ask him that question. I think it’s inappropriate … I want to keep it nice and pure. But he certainly wants to cut rates.”
The president also told NBC News he had “not much” doubt rates would fall. “We’re way high,” he said. Trump, who has linked his call for lower rates to hopes of financing federal government debt more cheaply and lowering costs for home mortgages, has voiced little concern about inflation that he feels has disappeared.
However, with the economy currently growing beyond estimates of its potential and inflation showing little recent progress toward the Fed’s target, there’s no sense of urgency at the central bank to cut rates, particularly not as steeply as Trump or Miran have suggested.
Reporting by Howard Schneider;
Editing by Dan Burns and Paul Simao
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