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Kevin Warsh faced some novel, perhaps unprecedented challenges as he chaired his first meeting of the US Federal Reserve Board, not the least of which was to demonstrate that he wasn\u2019t Donald Trump\u2019s \u201csock puppet<\/a>\u201d.<\/p>\n And so far, so good.<\/p>\n The Fed\u2019s first statement on monetary policy under its new chair<\/a> was far more concise than those issued during the tenure of his predecessor Jerome Powell, and lacked the guidance that has been a feature of Fed statements dating back to the aftermath of the 2008 financial crisis.<\/p>\n There was, however, a decidedly \u201chawkish\u201d tone to it, to Warsh\u2019s own statements and to the signals sent via the famous \u201cdot plot\u201d projections of members of the Federal Open Market Committee (FOMC) that decides US monetary policies.<\/p>\n Appointed by a president who made it abundantly and very loudly clear that he wanted a Fed chair who would deliver lower interest rates<\/a>, the clear emphasis Warsh placed on \u201cprice stability\u201d and an inflation rate that has remained above the Fed\u2019s target for the past five years was a statement of his and the Fed\u2019s independence.<\/p>\n Warsh also needed to show that he could lead a board and FOMC that had been, most unusually for an organisation that has traditionally been driven by consensus, increasingly fractured.<\/a><\/p>\n \u2018The recent past need not be a prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability.\u2019<\/p>\n New Federal Reserve chair Kevin Warsh<\/p>\n That was, perhaps, because its members wanted to signal their own independence in the face of the vicious verbal and legal attacks by Trump on Powell and another Fed governor, Lisa Cook<\/a>. Powell\u2019s term as chair ended last month but he remains on the board<\/a> until it is apparent that the Trump administration\u2019s legal assault on him and, effectively, on the central bank\u2019s independence, is \u201cwell and truly over\u201d.<\/p>\n At each of the Fed\u2019s most recent meetings, the level of dissent has grown. At this meeting, however, the decision to hold rates steady was unanimous \u2013 even though a number of governors and FOMC members had been publicly advocating a rate rise in the lead-up. The threat of a resistance movement developing within the Fed to their new chair has receded.<\/p>\n Given that Warsh has advocated significant changes to the way the Fed communicates, gathers the data to inform its decisions, manages its balance sheet and considers the implications of changes to the structure of the US economy, he also needed to justify why they were necessary and defuse the suspicion that they could be camouflage for his intention to deliver what Trump has demanded.<\/p>\n Related Article Again, so far, so good.<\/p>\n Apart from producing a very condensed version of the Fed\u2019s usual FOMC statement \u2013 sans any forward guidance, in line with his aversion to making forecasts \u2013 Warsh announced five task forces that will review the Fed\u2019s communications policies, its balance sheet policy and its reliance on existing data sources, look at the nation\u2019s productivity and jobs trends \u201cin an era of transformation\u201d and the Fed\u2019s framework to manage inflation.<\/p>\n If the basis on which the Fed makes its decisions is to change, it won\u2019t be on a personal whim or conviction but after considered review by internal and external experts.<\/p>\n While he\u2019s outlining potentially radical shifts in the way the US central bank operates, communicates and interacts with financial markets, any changes will have to be evidence-based and the arguments for change persuasive enough not to trigger a backlash in financial markets.<\/p>\n The introduction of the task forces does point to significant change \u2013 the start of a \u201cWarsh era\u201d for the Fed \u2013 but the core challenges for any central bank are the same as the Fed\u2019s dual mandate of maintaining price stability (i.e. keeping the inflation rate subdued) while maximising employment.<\/p>\n US inflation is not under control<\/a> and, as Warsh himself noted, hasn\u2019t been for the past five years. The Fed\u2019s preferred measure \u2013 the core Personal Consumption Expenditures index (PCE) \u2013 most recently came in at 3.3 per cent and has been rising steadily this year.<\/p>\n The Fed\u2019s \u201cdot plot\u201d chart<\/a> \u2013 which might be the last one, as Warsh isn\u2019t at all keen on the FOMC individual members\u2019 projections for key economic data \u2013 reflects significantly more pessimism for US inflation and interest rates since the last set of projections was released in March.<\/p>\n The median projection for PCE inflation has been raised from 2.7 per cent in March to 3.3 per cent, and for core PCE from 2.7 per cent to 3.3 per cent. In March the median projection for the Fed\u2019s policy rate, the federal funds rate, was 3.4 per cent at the end of this year. Now it\u2019s 3.8 per cent.<\/p>\n With the Fed currently targeting a federal funds rate of between 3.5 per cent and 3.75 per cent, that implies an expectation of at least one 25 basis point rate hike this year. Nine of the 18 members who voted (Warsh, perhaps unsurprisingly, didn\u2019t provide his dots) pencilled in at least one rate hike; six anticipate at least two.<\/p>\n That\u2019s a big shift from March and, given that Warsh chose not to dwell on the jobs market, other than to say it was moving in a good direction, provided the backdrop to what was a clear focus from the new chair on the inflation rate.<\/p>\n \u201cThe recent past need not be a prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability,\u201d he said, having described \u201cpersistently high prices\u201d as \u201ca burden for the American people\u201d.<\/p>\n The Fed\u2019s formal, truncated statement said the US economy was expanding at a solid pace despite \u201celevated uncertainty that owes, in part, to the conflict in the Middle East\u201d.<\/p>\n The US inflation rate was, however, edging up even before Trump decided to wage war on Iran.<\/p>\n The end of the conflict<\/a>, if that is what the 60-day ceasefire agreed this week is, might lead to oil and gasoline prices falling back from their recent elevated levels, but some fallout from those price hikes will still be seeping through the US economy, along with the continuing effects of Trump\u2019s tariffs and the increasing impact of the extraordinary levels of investment in artificial intelligence and the hardware and data centres associated with it.<\/p>\n Related Article Warsh has linked prospective AI-driven productivity gains to an ability to lower interest rates (a hypothesis his taskforces will investigate) but the AI investment is massive, ongoing and inflationary, while the productivity gains, if they emerge, are somewhere out there on the horizon. It could take some time, and rate hikes, before Warsh can contemplate delivering what Trump wants from him.<\/p>\n Trump himself, who has responded aggressively and abusively in the past when the Powell Fed disappointed him, adopted an \u201cit\u2019s all right, whatever\u201d approach<\/a> to the outcome of his personally vetted and appointed new Fed chair \u2013 although he is still advocating rate cuts despite the rising inflation rate.<\/p>\n \u201cIt\u2019s hard to believe. It just keeps the country down, and it\u2019s so unusual,\u201d he said (even though it is highly usual for central banks to maintain or increase their policy rates when the inflation rate is edging up).<\/p>\n \u201cBut we have a good guy over there right now, so I\u2019m guided by what he wants,\u201d Trump said.<\/p>\n Warsh is still in the honeymoon period with his Fed colleagues, financial markets and the president. Whether Trump\u2019s disengagement from his long-running feud with the Fed and his backing for Warsh lasts, will be tested if the FOMC members\u2019 projections of a rate rise, or two, before the end of the year come to pass.<\/p>\n One suspects not. But provided he\u2019s prepared for a potential Trump tongue-lashing, Warsh is in the chair now to chart his own course.<\/p>\n The Market Recap newsletter is a wrap of the day\u2019s trading. Get it each weekday afternoon<\/a>.<\/p>\n Save<\/p>\n You have reached your maximum number of saved items.<\/p>\n![\"New](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/26b366753524997171c7a3a14309e8cb7ed5f126.jpeg\")
New Fed chair Kevin Warsh is still in the honeymoon period with his colleagues, financial markets and Donald Trump.Bloomberg<\/p>\n![\"President](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/1781233335_266_0f70b486162bd7168cd8122685d4b37b3c035352.jpeg\")
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The Warsh era has started but Jerome Powell remains on the board until it is apparent that the Trump administration\u2019s assault on him and the central bank\u2019s independence, is \u201cwell and truly over\u201d.AP<\/p>\n![\"Warsh](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/1781239334_960_7a5d57ac691ee69f3445133fee29b6f6068f608a.jpeg\")
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