New Fed Chair Warsh Declares a "Reform-Oriented Fed"

[Financial News, New York = Reporter Lee Byung-chul] Kevin Warsh took office on the 22nd local time as the new chair of the Federal Reserve System (Fed).
Soon after taking office, Warsh declared that he would build a "reform-oriented Fed." However, even on his first day, voices inside the Fed openly raised the possibility of additional rate hikes, meaning the new Fed leadership is starting under much stronger tightening pressure than expected.
As the Warsh era begins, the mood inside the Fed is quickly turning more hawkish. Christopher Waller, a well-known dove, said in a speech at the German Economic Forum that the phrase "easing bias" should be removed from the policy statement, effectively leaving the door open to rate hikes.
Waller said, "We need to make it clear that the possibility of rate cuts is no greater than the possibility of rate hikes." He also assessed recent price trends, saying, "Inflationary pressures are spreading and strengthening across the economy."
In fact, inflationary pressure in the U.S. economy is rising again as surging global oil prices caused by the Iran War, high tariffs, and higher power and operating costs driven by the spread of Artificial Intelligence (AI) all converge. The Fed's preferred Personal Consumption Expenditures Price Index rose to 3.8% in April.
Markets are now interpreting Warsh's stance as suggesting that he may focus more on fighting inflation than on cutting rates, contrary to earlier expectations. The first Federal Open Market Committee (FOMC) meeting under the Warsh leadership, set for next month on the 16th and 17th, is expected to become a turning point for the direction of monetary policy.
U.S. President Donald Trump presided over Warsh's inauguration ceremony at the White House and publicly urged him to "carry out your role with complete independence." At the same time, he made his own view on interest-rate policy clear, saying, "Growth does not necessarily mean inflation." He also emphasized, "Warsh will receive the full support of my administration."
pride@fnnews.com Reporter