Kevin Warsh comes into the Fed facing a big 'family fight' over cutting interest rates
View original at cnbc.comKevin Warsh comes into the Fed facing a big 'family fight' over cutting interest rates If new Federal Reserve Chair Kevin Warsh is still itching for a "good family fight" over monetary policy, he is likely to get one if he sticks to his guns on interest rate cuts…
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People at the Fed are responsive to arguments; though Miran voted against every rate decision, other officials started to respond to his contrarian arguments over time.
60% confidenceWarsh is good at working with people and will seek reasonable consensus; he is not the type to pick fights with the committee.
60% confidenceWarsh can present removal of the forward guidance sentence as a shift to a more agnostic communications framework rather than a tightening signal, without admitting the committee forced his hand.
60% confidenceWarsh will try to move the committee over time with arguments and data rather than picking fights.
60% confidenceWarsh bases his decisions on his read of what's happening structurally in the economy and favors rate decreases on those grounds, but cannot make those arguments credibly now because of the inflation problem.
60% confidenceFed chairs Powell, Bernanke, and Yellen each called individual FOMC participants before meetings to gauge positions; driving toward consensus is central to the FOMC process.
60% confidenceCurrent inflation is temporary and will fade once the fighting in Iran ceases and disinflationary forces such as increased productivity take over — echoing Trump administration positioning.
60% confidenceWarsh expressed eagerness for a 'good family fight' over monetary policy during his Senate confirmation hearing.
60% confidenceWarsh is fortunate in his experience and family fights at the Fed generally lead to constructive outcomes.
60% confidenceA Fed chair publicly disagreeing with and losing to the committee on a rate vote would undermine their power, since the chair's job is to achieve consensus.
60% confidence
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