Warsh confirmed as next Fed Chairman

Will Warsh disappoint Trump? CNBC

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There will be little appetite on the Fed to deliver the quick rate cut that Trump has demanded. The president said recently he would be disappointed if Warsh can’t deliver it.

Warsh told senators during his confirmation hearing that he never promised Trump he could. And he has framed his mission as Fed chair around the idea that the central bank has been overly obsessed with the minutiae of short-term economic data at the expense of resetting its credibility with the markets.

The evidence for that lost credibility shows up in inflation expectations, in Warsh’s view: Neither market participants nor consumers surveyed by the Fed expect inflation to return to the Fed’s 2% goal within five years.

Warsh will try to reset those expectations by getting the Fed out of the business of committing to where interest rates will go in the form of forward guidance, revamping communications so that the institution speaks more with one voice, updating the data sources the Fed relies on, and striking a new bargain with the Treasury Department about how the two share responsibility for managing the economy.

Can Warsh put that all through and deliver the rate cut Trump expects? The market doesn’t think so, assigning him a 1% chance of getting rates down this year, according to CME FedWatch.

There is a distinct possibility that Trump will explode if Warsh fails in June to put through cuts. But that idea assumes passivity from Warsh. The other option is that the Fed chair who has spent nearly a decade preparing for this moment will continue to persuade the president that he can deliver the golden era Trump so desperately wants. It would hardly be the first time Trump pivoted suddenly toward a politically convenient idea when it comes from someone he trusts.

Warsh’s divided support may say more about how the nation has changed than his politics. His pitch has been that he understands better than anyone how to ensure the Fed’s lasting influence as a stabilizing force for Americans’ livelihoods despite the broader political deterioration.

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I disagree with Trump here.

I would love the rate to go down as it helps lending but knowing what type of debt situation most are dealing with no way I’m allowing banks to loan more money out with less guarantee of payback.

Inflation has added to people’s credit cards just in the overage %.