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Powell Out, Warsh In
Kevin Warsh became the 17th Federal Reserve Chair on May 15, replacing Jerome Powell. Trump had been waiting for this, as I'm sure you saw him publicly berate Powell for months, demanding lower interest rates from him. What was interesting to hear during Warsh's confirmation was that he said he wouldn't commit to any rate cuts, and Trump appeared to be okay with that. I think that's actually good - that the market should guide the adjustments.
Why the shift? Inflation rose sharply in March and April - up .9% and .6% respectively. Cutting rates is not a good thing when inflation is trending up. According to the FedWatch tool, the market is predicting there's a 99.3% chance the Fed does not cut rates at their next meeting on June 17. So Warsh and the market appear to be aligned.
What To Expect From Kevin Warsh
His primary focus is the money printing. He said: "Run the printing press a little bit less. Let the balance sheet come down." In his view, that's the root cause of inflation and it needs to be addressed before rate cuts can happen. Powell said that for years, that a 2% inflation rate was the target before beginning rate cuts. Even though he cut them anyway.
Warsh also has been vocal about who the money printing actually helped. After 15 years of flooding the system with cash, he says it mostly benefited people who already owned stocks and real estate, not everyday Americans. He calls it "reverse Robin Hood."
I'd like to see that happen. The value of the dollar is in bad shape, as we all can see in the price of homes, food, and everything else.
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