Source: Fortune
Summary
Kevin Warsh, the new Federal Reserve chair, held his first press conference, where he emphasized the importance of meeting the price stability objective, citing inflation running at twice the Fed’s 2% target for five years. Warsh’s comments were seen as hawkish, leading to a market reaction with the Dow falling 507 points and the S&P 500 losing 1.2%. Warsh also announced the stripping of forward guidance and the formation of five task forces to reexamine the Fed’s communications and inflation framework.
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The numbers tell one story.
Warsh’s comments were seen as a departure from his previous dovish stance, with some attributing it to his desire to assert his independence from the White House. The market reaction was swift, with stocks falling and bond yields rising. Warsh’s commitment to getting back to 2% inflation was “strong, unanimous, and unambiguous.” The task forces announced by Warsh may be a way to buy time and stall on hard decisions.
Warsh has built a 15-year argument on one premise—that inflation is a choice, and that the Fed forfeited its credibility by pretending otherwise. Now it’s his choice.
Author: Evan Null
