Kevin Warsh walked into the Federal Reserve chairman's office promising the president lower interest rates, and at his very first meeting told working Americans to keep paying the price for inflation the central bank itself created.
This is the revolving door in action. Warsh is a Republican financier — a Wall Street creature through and through — and his debut at the head of the Federal Open Market Committee proved exactly where his loyalties sit. Nine of nineteen FOMC officials now say at least one rate hike is appropriate later this year. Only one member saw a cut coming. Warsh himself declared, "This committee will deliver price stability," which is central-bank speak for: borrowing stays expensive, mortgages stay out of reach, and the financial class gets to clip its coupons in peace.
The bait-and-switch is the real story. Last summer, Warsh called the Fed's post-COVID inflation surge "the greatest mistake in macroeconomic policy in forty-five years" — a hawkish line that built his brand. Then, late last year, when his name surfaced as a possible Powell successor, Warsh pivoted. He started arguing that artificial intelligence could generate big productivity gains and be "structurally disinflationary" — the clear implication being that the Fed could safely cut rates. This was exactly what Donald Trump wanted to hear. Trump said he would pick "someone who believes in lower interest rates, by a lot." Warsh got the nod.
Then came the switch. At his first press conference, Warsh talked tough, noting the Fed hadn't met its inflation target in over five years. Futures markets immediately priced in a possible rate rise by September. Ed Yardeni of Yardeni Research put it plainly: "We thought he was a dove who favored lowering the federal funds rate because he believes that AI is boosting productivity and economic growth while keeping a lid on inflation." They thought wrong.
The inflation number for last month hit 4.2 percent, the highest in more than three years. The New Yorker framed this as partly a consequence of the conflict with Iran boosting energy prices. Fair context — but it doesn't explain why Warsh sold the president and the public one policy and delivered another.
Meanwhile, look at what sovereign nations with their own interests do when they get the chance. Hungary's central bank is expected to cut its benchmark rate by a quarter point to 6 percent, according to 20 of 21 economists surveyed by Bloomberg. Slowing inflation and a stronger forint give Budapest room to ease borrowing costs for its people. They're not running a charity — they're acting in what they see as their national interest. The contrast with Washington is telling.
Trump, for his part, was uncharacteristically muted when asked about the prospect of rate hikes, saying only, "we have a very good guy over there now. So, I'm guided by what he wants." This from a man who called Fed policymakers "boneheads" in 2019 for not cutting rates fast enough. What changed? Warsh is supposed to be his guy. Instead, the working-class homeowner who was promised relief gets the same Wall Street medicine.
The question isn't whether Warsh is independent. It's who he's independent from. The answer, as always, is you.
