Good intentions and personnel changes at the Federal Reserve can’t rewrite the deeper structural reality of inflation and economic instability. Kevin Warsh’s ascension to Chair will be another case in point: a case study in cautious optimism meeting institutional reality.
A former Fed Governor (2006–2011), investment banker, and Bush administration veteran, Warsh brings experience, a monetarist-leaning skepticism of recent Fed overreach, and a welcome emphasis on price stability. Yet the core constraints remain: the Fed exerts significant control over the price of money—not the actual quantity in circulation—and enhanced forecasting cannot eliminate the inherent unpredictability of complex economies.
Warsh, now 56, earned a BA in public policy from Stanford and a JD from Harvard Law School. He rose quickly at Morgan Stanley in Mergers and Acquisitions before joining the White House National Economic Council. At the age of 35, he was the youngest person ever appointed as a Fed Governor. He navigated the 2008 Global Financial Crisis (GFC), including roles in the Bear Stearns and AIG episodes. Post-Fed, he became a Hoover Institution fellow and Stanford lecturer. He also married into the Lauder family. Trump nominated him to succeed Jerome Powell, and the Senate narrowly confirmed him (54-45, largely party-line) on May 13, 2026. He was sworn in on May 22.
Warsh has long critiqued post-GFC Fed activism—excessive balance sheet expansion, heavy forward guidance, and mission creep into fiscal-like territory. He channels Milton Friedman: “Inflation is a choice,” tied to money supply and policy decisions rather than mere supply shocks or wage pressures. In hearings and interviews, he mocked elite economists for ignoring money’s role and quoted Paul Volcker on the need to watch money growth. He favors trimmed-mean inflation measures that strip volatile items to focus on underlying trends, skepticism of rigid Phillips Curve thinking, and a smaller steady-state balance sheet to reduce the Fed’s footprint in markets.
Warsh’s debut Federal Open Market Committee meeting (June 16-17, 2026) was unanimous (as it almost always is) in holding the federal funds rate at 3.50 – 3.7 percent. The statement announcing this was drastically shortened compared to preceding issues (around 130 words vs. prior 300+), jettisoning forward guidance language. Warsh explicitly stated it is “not the business we should be in,” and announced the launching of task forces to review communications, the dot plot, and operations.
What projections Warsh’s team did offer exhibited a decidedly hawkish tilt: median 2026 rate projection rose to 3.8%, with nine of 18 participants seeing at least one hike by year-end. Personal Consumer Expenditures inflation projections were higher (~3.6 percent for 2026) and GDP growth was slower. Warsh notably withheld his own dot projections, underscoring data-dependence over pre-commitment.
In the press conference, he repeatedly stressed, “This committee will deliver price stability.”
Of course, the inherent conflict is obvious—delivering 2 percent annual inflation (what is meant in Fed-Speak by “price stability”) means more monetary inflation.
Most interesting, at least in terms of things to watch for going forward, is Warsh’s advocacy of trimmed-mean inflation measures over the usual core PCE/CPI readings. Meant to exclude extremes, whether higher or lower, the argument is that this is just “noise,” not informative of broader price trends. Given that most of the extremes seen over the past decade, and likely to be seen in the foreseeable future, are to the upside, Warsh’s new measure almost guarantees lower readings.
It may sound nit-picky given the inherent nature of the Federal Reserve System, but it is worth noting that the more metrics they have at hand—CPI, core CPI, median CPI, PCE, core PCE—the easier it is for them to manufacture consent for a given policy by choosing the most favorable metric.
From an academic standpoint, Warsh’s practical monetarism updates Friedman for the rate-targeting era: watch money growth as a signal, prioritize price stability as primary (without abandoning the dual mandate), and avoid over-reliance on models or promises. He views recent inflation partly as a fiscal-monetary choice, critiques QE’s legacy, and wants the Fed out of picking winners via balance sheet policy. That’s welcome, but not nearly Austrian enough.
Of course, weary from the years of Powell’s reign, it is impossible not to hear a refreshing note in all this after years of incredibly confident and even more spectacular misses by the Fed. The post-COVID inflation surge exposed overconfidence in “transitory” narratives and forward guidance that locked the Fed in. Warsh’s comms overhaul—shorter statements, less guidance, task forces—acknowledges humility: the Fed should react to data, not pre-shape expectations it may not meet, and which in fact create new realities.
But any optimism should be quickly quashed by the realities of central banking: none of this will fundamentally alter the inflation equation. From the monetary side, expansion will continue, making us poorer at a more predictable and restrained rate, Warsh hopes.
Fiscal deficits of multiple trillion are almost certain to persist for the foreseeable future, the deficit made up for by printing more money.
Then there are supply-side shocks (energy, geopolitics, labor/immigration dynamics), productivity trends, and regulatory uncertainty. Tariffs, energy volatility, or wage pressures can and will persist regardless of the funds rate, and all of these will put upward pressure on prices as measured by CPI.
It is all well and good for Warsh to caustically comment that inflation is a policy choice, yet the Fed cannot dictate fiscal policy or resolve knowledge problems in a dynamic economy. “Improved forecasts” or better communications help marginally, but ignore that inflation is emergent and unpredictable and inherent in fiat central banking. While personnel do matter, and Warsh appears more hawkish on stability and independent than some alternatives, it does so only at the margins: institutional incentives, dual-mandate tensions, and political pressures endure and dominate.
The “new sheriff” changes the tone, but deeper forces cement the plot.
Best case scenario: we get poorer more slowly than we have been the past several years.
