New US Federal Reserve Chairman Kevin Warsh will be under scrutiny today as he oversees the first Federal Open Market Committee (FOMC) meeting to determine benchmark interest rates.
Warsh was selected by President Donald Trump to replace beleaguered former Chair Jerome Powell, who was the target of much criticism from the President as being “too late” on lowering interest rates. Somehow, the President failed to understand that markets are the key driver of rate decisions, and while the Fed has not always gotten it right (remember transitory inflation under Biden?), inflation has ticked higher, due in part to higher gas prices and tariffs that add to the cost of consumer purchases.
While President Trump may want Warsh to lower rates, it is not his decision alone, as the Committee will most likely want to hold rates steady.
More recently, Trump has acknowledged that the Fed must remain independent and stated that he will not influence its decision, but the President does change his opinion with regularity.
Matthew Ryan, Head of Market Strategy at financial services firm Ebury, believes the recent headlines regarding a deal with Iran and oil prices heading lower may not be enough for the Fed to halt a “hawkish pivot” this week.
“Macroeconomic data has rendered inert the bank’s easing bias, as not only are inflationary pressures building, but the US economy and labour market are proving extraordinarily resilient. After a couple of officials voted against the inclusion of the easing language at the last meeting, the next logical step is for it to be removed altogether. This seems likely to us, particularly given that Warsh himself has explicitly voiced his dislike of forward guidance in his previous communications,” says Ryan.
He explains that if Warsh is quiet about the direction of rates, they will pay attention to several data points. First, the updated dot plot of rate projections; second, how Warsh performs at his first Fed rate-announcement presser.
“An upward revision to the median dot to show no change in 2026 seems on the cards, although we do not think that the FOMC will go so far as to outright signal a hike just yet, which could potentially disappoint markets given that a rate increase is almost fully priced in by year-end,” shares Ryan. “As for Warsh, we will be looking to see whether he outlines his plans for an overhaul of the Fed, namely detailing any proposals for a reduction in the balance sheet and a reduction in forward guidance.”
The FOMC press conference is scheduled for 230PM ET today.