The Warsh Factor and Fed Independence
President Trump's nomination of Kevin Warsh to lead the Federal Reserve has triggered immediate market volatility. Investors are grappling with whether a new Chair will yield to political pressure for lower interest rates even as inflation remains above the Fed's 2% target.
- Political Pressure: Markets are wary that the Fed could lose its separation from the administration's "run it hot" economic agenda.
Rate Path Uncertainty: While futures initially priced in two rate cuts for 2026, a recent jump in wholesale inflation to 3% has experts questioning if any further cuts are possible this year.
