Fed Policy Shift Under Chair Warsh
Key Questions
Who is the new Federal Reserve Chair and what changes are expected?
Kevin Warsh has been sworn in as Fed Chair, with expectations of balance sheet reduction and adjustments to forward guidance. Multiple governors have signaled readiness to hike rates if needed.
What are markets currently pricing in for Fed policy?
Markets are now pricing a potential rate hike by year-end amid signs of persistent inflation. This marks a shift from earlier expectations of easing.
How do the trimmed mean PCE and core PCE differ currently?
The trimmed mean PCE has cooled to 2.3%, while core PCE remains at 3.3% year-over-year. This split is creating uncertainty in policy expectations.
What was the latest reading on monthly core PCE inflation?
April's monthly core PCE came in at 0.2%, softer than the 0.3% expected, though headline inflation remains sticky. The Fed's preferred gauge rose to a 3-year high.
What pressures is the Fed facing regarding its independence?
Fed independence is under political pressure, including from figures like Peter Navarro. The June FOMC meeting is viewed as critical for upcoming decisions.
Kevin Warsh sworn in as Fed chair. Multiple governors (Cook, Jefferson) signal readiness to hike if inflation persists. Markets now pricing a potential rate hike by year-end. Fed independence under political pressure (Navarro). A split has emerged: trimmed mean PCE cooled to 2.3% vs core PCE 3.3% y/y. April monthly core PCE softened to 0.2% (vs 0.3% expected), but headline remains sticky. Balance sheet reduction and forward guidance changes expected. June FOMC meeting critical.