Economic Pulse Inflation & Markets

Warsh sworn in May 2026 (54-45); hawkish tilt. FOMC minutes confirm majority sees hike likely if inflation stays above 2%; 3 dissents wanted to remove easing bias; rate hikes on table. June 17-18 FOMC tests QT-for-Cuts; 97% hold odds June, rising hike odds. Citi AI inflation twist may give Warsh room to ease. Trump-Warsh political tie adds uncertainty; Warsh's QT workaround risky given 2019 liquidity memories. Political feedback loop intensifies pressure. New analysis: Warsh uses QT as political cover to avoid Trump headlines; dot plot ambiguity clouds dollar outlook; Trump can no longer blame Powell, tying economic outcomes to his own midterm stakes. Lacalle analysis adds sovereign debt bubble angle. Kotok warns PPI intermediate components signal consumer inflation ahead, reinforcing hawkish stance. New profile reveals Warsh's crypto exposure and opaque communication style, increasing market volatility risk. Research shows Fed press conferences drive market reactions more than statements—critical for Warsh's first presser. **Latest:** BNY Mellon dropped rate cut forecasts; Waller signals equal odds of hikes/cuts. 'Run It Hot' thesis argues Warsh won't hike due to lack of votes, fiscal dominance, and AI capex—contrarian to market pricing; gold options data signals divergence. Warsh's 'regime change' faces real constraints: FOMC consensus needed, risk of alienating colleagues. **New:** Warsh proposes ending press conferences after every meeting and scrapping dot plots; also advocates trimmed mean inflation measures (Dallas 2.3%, Cleveland 2.8%) vs core PCE 3%, potentially giving cover to ease. Inflation expectations jumped to 4.8% short-term, 3.9% long-term. Deutsche Bank flags Thursday PCE as key, expects core +0.3% MoM. **Today:** Waller ready to axe 'easing bias' but not yet hiking—major hawkish signal. Former NY Fed President Dudley challenges 'restrictive' narrative, says real rates likely higher due to AI capex and fiscal deficits; inflation expectations ticking up, Fed credibility at risk (five years above 2% target). Warsh channels Greenspan—holding rates steady during tech booms, less forward guidance, fewer pressers. RIA article argues Fed is neutral, not hawkish; market pricing 72% chance of hike in next year. Warsh/Mike Tyson article provides reality check: inflation, committee hawkishness, and liquidity constraints will limit near-term rate cuts and QT. **New from today's reading:** Warsh's first 100 days plan includes scrapping dot plots and press conferences, strict 2% target, first FOMC June 16-17. Yield curve flattening and 10yr drop to 4.5% on Iran deal optimism, but hike probability still 80% by December. Roberts argues Fed is neutral, not hawkish; S&P near records despite yield pressure. Citadel Securities calls for rate hikes, adding institutional weight; Shah argues inflation greater risk than labor, AI capex fueling growth, Warsh's hands tied by politics. Warsh sworn in at White House underscores Trump's grip on Fed independence; Trump's mixed signals on independence. **New:** Warsh inherits 'Fed curse'—historical 12% S&P drawdown within 3 months of new chair; 'look through' approach to supply shocks; Bessent's Russian oil waiver buys time. **Latest from today's reading:** FOMC minutes confirm hawkish shift: majority sees hikes if inflation persists, three dissents wanted to remove easing bias. Dudley warns Fed credibility at risk after five years above target; real rates higher due to AI capex/fiscal deficits. **Today's new articles:** Warsh's prepared remarks affirm independence but avoid rate views, adding ambiguity. TheStreet article offers counterpoint: Natixis skeptical of hikes under Warsh. Another article reinforces QT as political cover, VIX vs sentiment disconnect. April CPI 3.8% with wage growth 3.6% adds political pressure on Warsh. **New from today's reading:** Governor Cook's speech confirms PCE at 3.8% headline, core 3.3%, flags AI-driven investment as additional inflation risk; labor market stable but downside risks. Warsh's institutional reform pivot (balance sheet, ESG) emerges as a strategy to avoid rate cuts amid divided FOMC. Natixis's Briggs doubts rate hikes, offering contrarian view. **New from today's 10 articles:** Board names Jerome Powell temporary Fed chair; Miran and Bowman dissent; Miran resignation letter signals clearing way for Warsh. Video preview of PCE report highlights Warsh's trap and AI productivity vs data reality.