Trump to Let Warsh Set Rates Independently
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- Trump said he'll let incoming Fed Chair Kevin Warsh "do what he wants to do" with interest rates, in a Tuesday interview with the Washington Examiner, in response to a question about whether Warsh would cut rates even as markets are pricing in a hike.
- Warsh is slated to be sworn in as Fed chair on Friday at the White House — the first Fed chair sworn in there in almost 40 years, per MarketWatch.
- Trump's remark appears to acknowledge that Warsh is one of 12 voters on the FOMC; economist Derek Tang of Monetary Policy Analytics said "Trump is aware of how the FOMC works" and "may not get his way, certainly not at the beginning."
- Tang framed the comment as the White House building "an offramp in advance" because no rate cut is coming in June, giving Warsh breathing room in his first months on the job.
- Derivative markets see a 60% likelihood the Fed will raise rates by December — a hike, not a cut — putting Warsh on a collision course with the rate-cuts Trump has long demanded.
- Tang warned the White House's patience with Warsh could run out as November's midterm elections approach, saying voters' feelings about the economy need to improve by September for Republicans to replicate their 2024 wins.
- Trump has spent months hammering departing Fed Chair Jerome Powell for not lowering rates swiftly enough, making Tuesday's hands-off posture a sharp break from that pattern.
Why it matters: Trump is handing Warsh political cover at the worst possible moment: derivatives markets price a 60% chance of a rate HIKE by December, not the cut Trump has spent a year demanding. If Warsh doesn't deliver rate relief and voter economic sentiment doesn't improve by September, Republicans head into midterms with the Fed — not the White House — setting the policy narrative.
