The Fed Under Kevin Warsh

This report examines the policy priorities of newly confirmed Fed Chair Kevin Warsh. It details his agenda of returning to monetary policy orthodoxy, reducing the Fed's balance sheet, and addressing supply-side inflation.

Key Takeaways

• 1.Kevin Warsh's appointment signals a 'regime change' at the Federal Reserve toward narrower policy mandates, reduced balance sheet footprints, and stricter adherence to a 2% inflation target.
• 2.Warsh is a 'supply-side optimist' who believes AI-driven productivity gains may justify lower interest rates by compressing unit labor costs.
• 3.The Fed faces a difficult 'macro inheritance' with reaccelerating supply-side inflation from geopolitical tensions and high US government fiscal deficits.

Table of Contents

• Academic Rigor and Market Experience
• Ode to Independence
• Return to Orthodoxy
• The Macro Inheritance
• Historically Hawkish on Inflation
• Leaning into Bond Market Led Tightening
• Supply-Side Optimist
• Less Room to Feign Indifference to Funding Stress
• Structurally Smaller Footprint
• Pro-Growth Stewardship

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