Warsh's Fed Credibility Tested by Hot August CPI — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- August CPI rose 0.4% headline and 0.3% core (both above expectations), with headline inflation running 3.4% above year-ago levels and PCE at 3.7%, sharpening pressure on Warsh's inflation-warnings stance
- Kevin Warsh told Jackson Hole that "accuracy in forecasting is still just an aspiration" for the Fed and argued underlying inflation has not "meaningfully improved" despite better summer PCE/CPI prints
- Governor Christopher Waller and NY Fed President John Williams entered the meeting preferring to wait for remaining data; Waller publicly called Warsh's advice "weird" and privately dismissed his task forces, per the Wall Street Journal
- President Trump has pushed Warsh to cut rates while insisting he trusts Warsh's conscience, though the article notes a theory of a tacit pre-midterm arrangement not to raise rates ahead of Nov. 3
- The 10-year Treasury yield climbed to 4.95% as of early Friday morning since Warsh became chair, with Warsh telling his July press conference "the markets have done quite a bit" — remarks some read as wanting market-driven tightening
- If Warsh doesn't act now, the article argues investors and colleagues may turn to a "shadow chair" — potentially Trump, Treasury Secretary Scott Bessent, or Waller — and long-term yields could rise to price in the uncertainty
Why it matters: Warsh faces a binary choice at the Sept. 15-16 meeting: back his hawkish rhetoric with a rate hike, or watch his credibility erode as Waller and Williams push for patience. Failure to use his sway invites markets and the FOMC to look past him to Trump, Bessent, or Waller as the de facto decision-maker, with the 10-year yield already at 4.95% and vulnerable to further rises.
Ask SkimNews
