Kevin Warsh · Donald Trump · Federal Reserve (FED) · Wall Street · Fortune Technology
Kevin Warsh showed that he’s decisively not Trump’s ‘sock puppet’—and markets didn’t like it
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Before Kevin Warsh stepped up to the podium Wednesday afternoon, no one knew which Warsh would show up: the hawk or the “sock puppet.”
Key facts
- At his confirmation hearing, he criticized Jerome Powell’s Fed, saying the rate hikes of 2021–22 had contributed to the worst inflation in 45 years
- The Fed held its benchmark rate at 3.5% to 3.75%, as expected, but now nine out of 18 officials pencil in at least one hike this year, and the new statement stripped out the old easing bias
- The S&P 500 lost 1.2%, the Nasdaq 1.3%, with communications services the worst-hit sector and tech bellwethers leading the way down
- Two-year Treasury yields, which track rate expectations most closely, jumped about 16 basis points to 4.21%
Summary
Before Kevin Warsh stepped up to the podium Wednesday afternoon, no one knew which Warsh would show up: the hawk or the “sock puppet.” There was the young, spry, and hawkish Warsh of 2011, a Fed governor who, following the financial crisis, quit in protest over the Fed’s bond-buying. At his confirmation hearing, he criticized Jerome Powell’s Fed, saying the rate hikes of 2021–22 had contributed to the worst inflation in 45 years. But even as Warsh laughed off those complaints, there was no real way for anyone to know who would show up at the new Fed chair’s first press conference—until 2 p.m. on Wednesday, when the Federal Reserve released its policy statement. Inflation has been running above the Fed’s 2% target for five years. To Jon Hilsenrath, the former Wall Street Journal reporter long known as “the Fed whisperer,” that settled it.