The Kevin Warsh Fed

Kevin Warsh's tenure as Fed chair is expected to begin with a dovish bias justified by an AI productivity thesis, before shifting to aggressive hikes in 2027 as employment rebounds. Significant balance sheet contraction is seen as unlikely.

Key Takeaways

• 1.Kevin Warsh is expected to use an 'AI productivity' narrative to avoid immediate rate hikes, despite persistent inflation.
• 2.Expect rate hikes in 2027 as the Fed reacts to a likely rebound in employment, potentially tightening more than consensus.
• 3.Significant balance sheet reduction (QT) is unlikely; talk of 'shrinking the Fed's footprint' is largely virtue signaling.

Table of Contents

• The Kevin Warsh Fed
• How did Warsh get the job?
• Is Warsh going to deliver rate cuts?
• What about rate hikes?
• What about 'shrinking the Fed's footprint'?
• Will the market 'test' Kevin Warsh?
• Bottom line

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