Overview
- Kevin Warsh was sworn in as Federal Reserve chair on Friday, May 22, and has already proposed cutting back regular Fed briefings and adopting a rules-based approach to guide decisions.
- U.S. inflation is running well above the Fed’s 2% goal with the PCE price index near 3.8% year‑over‑year in April, prompting several Fed officials to say higher policy rates may be needed if inflation does not ease.
- Oil price rises tied to the Iran conflict and tariff-driven supply costs are adding persistent price pressure that monetary policy cannot directly fix and risk lifting longer‑run inflation expectations.
- Markets have rapidly repriced policy: trading tools now show near certainty of a June hold and meaningful odds of rate increases later in the year rather than the multiple cuts previously expected.
- A visible split has opened inside the Fed over whether to rely on AI-driven productivity to lower inflation, and Warsh’s communication changes plus the unusual overlap with Jerome Powell as a voting governor raise uncertainty about how policy choices will be signaled.