Saying no to the fat stupid turd...

Trump is demanding rate cuts. Kevin Warsh’s first challenge may be saying no.

The new central bank chief's words will be closely followed by investors because they can have sweeping implications for asset prices around the world.

By Victoria Guida

Federal Reserve Chair Kevin Warsh will speak publicly for the first time on Wednesday in his new role as leader of the world’s top central bank.

He might not want to say too much.

The Fed chief, who took office last month, is likely to limit his pronouncements about the potential path for borrowing costs, with the U.S. economy facing an unpredictable combination of rising inflation, roaring stocks and skittish bond investors. That matters because the central bank chair’s words can have sweeping implications for asset prices around the world.

But while investors are desperate for guidance, Warsh has long argued that Fed officials communicate too often about economic developments and what they might mean for rates. That, he says, makes it harder for financial markets to separate meaningful signals from the chatter.

Saying less might also be Warsh’s easiest route to avoid — for now — a confrontation with President Donald Trump, who has been demanding steep interest rate cuts since he returned to office.

“His best move right now is just to hang tight” on giving any signal about what comes next, said Ellen Meade, a former senior Fed economist who is now a professor at Duke University. But “at some point that becomes an untenable position if inflation continues to print hot.”

The central bank is expected to hold interest rates between 3.5 percent and 3.75 percent at its policy-setting meeting in Washington. The decision will be followed by Warsh’s first press conference as chair.

Even a cautious stance could eventually stoke tension with Trump, who has made clear he picked the former investment banker and Fed veteran with the expectation that he will slash borrowing costs, despite the fact that the war in Iran has pushed up energy prices and fueled inflation.

Worse for Trump, there’s a significant chance that the Fed might actually raise interest rates at some point in 2026 — an election year — to fight price spikes. For a president who relentlessly attacked former Fed Chair Jerome Powell for not cutting rates, that possibility could be intolerable.

Warsh’s elevation to the chair marks an extraordinary moment for the central bank. Powell, who led the Fed for eight years, says he will continue to serve as a regular board member — the first time in almost 80 years that an outgoing chair has decided to stay on — out of concern for the central bank’s independence. And any day now, the Supreme Court will render a potentially historic decision on a case that could clarify the president’s power to remove Fed board members.

On top of that, Powell leaves his successor the thorny task of facing down uncomfortably high bond yields that might climb even more as markets absorb a mix of growing debt, elevated prices and soaring expenditures on artificial intelligence infrastructure. All of those make the prospect of lower rates seem less likely.

The stakes for AI’s development — an increasingly important driver of the economy — are especially high with any move the Fed makes.

The Trump administration has emphasized the potential for technological innovation to supercharge economic growth, a future that will continue to require a massive amount of investment that would be stifled by higher borrowing costs, said Derek Tang, an economist at LHMeyer/Monetary Policy Analytics.

“He knows and everyone assumes correctly that he was chosen by Trump in part because Trump believes Warsh to be able to deliver easier policy,” Tang said. “But I think Warsh does subscribe to this view of a new American boom.”

Trump himself has hinted that he knows Warsh might not cut rates right away, given the Iran war’s impact on inflation, but that patience could fade if the economy continues to slow.

That adds yet another element of complexity to how Warsh decides to tell the world what might be next, a task already muddied by deep divisions on the central bank’s rate-setting committee. A growing minority of the Federal Open Market Committee has called for the central bank to signal that rate hikes are just as likely as rate cuts.

Notably, the president himself also suggested that the new central bank chief will be giving markets less of a steer about where rates might head. Warsh will be “curtailing the Fed’s practice of issuing so-called forward guidance,” Trump said during the swearing-in ceremony at the White House last month.

But there are also risks to using the Fed’s communications toolbox less. Warsh has hinted that he might have fewer press conferences than the eight that Powell held each year, which meant one after each rate decision.

“If one has a press conference, one wants to deliver some important news,” Warsh said at his confirmation hearing.

Yet the Fed chair has also criticized the cacophony of 18 other voices on the central bank’s rate-setting committee, and he has no means to preclude them from speaking when they want to. Powell’s voice would draw particular attention, should he choose to use it.

“Something [Warsh] is going to quickly learn is that the press conference is the chair’s best friend,” said Michael Feroli, chief U.S. economist at JPMorgan Chase. “It’s the ability of the chair to come right out of the gate and set the narrative.”

“If he chooses to diminish the press conference in any way, that amplifies the voices of everyone else on the committee, including those whose voices he may not necessarily find he wants to amplify as time goes on,” he added.

Some of those voices have suggested that rate increases may be on the table.

“For today, it’s reasonable to keep rates steady given the uncertainties around the economic outlook,” Cleveland Fed President Beth Hammack warned in a speech earlier this month. “But if recent trends continue, it may soon be appropriate to act.”

Another complication to paring back public communications: Inflation is higher than the Fed’s 2 percent target and has been for years. One way to demonstrate the institution’s commitment to keeping prices in check is to point to circumstances in which rate hikes would be necessary.

That’s not easy to do if the Fed isn’t sending many signals about what might come next.

“In a world where they’re not using forward guidance, they would be left with simply hiking [rates] as the only way they could signal their commitment to fighting inflation,” Tang said.

Markets will be watching closely to get a feel for how much Warsh intends to loop them in on how he’s thinking about the outlook. Either way, they’ll read into his actions, particularly given how vocal other members of the Fed have been about their own interpretations of the data.

“His silence might be taken as tacit acceptance that the rest of the committee is right,” Tang said. “There’s a lot of tension rumbling beneath the surface, so Warsh needs to counter that, but he also needs to get ahead of what communications are going to come from his colleagues.”