Today, Kevin Warsh finished presiding over his first meeting как Федеральный резерв chair, and boy, it was interesting to say the least. Now, keep in mind that I’m the only person on Earth who had #AnyOneButWarsh, so my feelings are well known, but as always, I’m going to call it down the line on what his comments means for the economy.
For now, I’m going to give you quick three-step takeaway. Tomorrow’s ЖильеПроволока Ежедневный подкаст will dive into today’s topic in more detail and will be just me speaking, as Editor in Chief Sarah Wheeler couldn’t join me today to talk about Warsh.
‘Uneven’ policy impacts housing
For our audience, ставки по ипотечным кредитам matter. The issue with mortgage rates is that инфляция has taken off stronger than the Fed would like, and then the Iran conflict piled on top of that.
Without the labor data getting softer, it’s hard for mortgage rates to go much lower than where we are today. But Warsh did say that monetary policy is “uneven,” meaning that it’s tight for housing but not for other parts of the economy.
That’s a fair statement to make on his part and something former Chair Джером Пауэлл would never say. So, on that point, it’s a positive for the Рынок жилья that Warsh is thinking about this. This also means that if the economy softens, lowering rates to boost housing is something the new Fed leader is already considering.
Rest in peace, forward guidance
Another positive thing that I saw today is the end of forward guidance. I wasn’t a fan of the dot plot or the Fed’s projections, because they became very sloppy at times in capturing market reactions. So, death to the dot plots — which basically tells you what Fed members think about future federal funds rate policy — is fine with me.
With that said, the knock on Warsh has always been that he isn’t an economic thinker. Nobody really knows what he believes, except that he’s been bashing the Fed for eight years and now he’s the chairman.
Once again, #AnyoneButWarsh, so he needs to do a better job of providing guidance for forward-looking market thinkers — or the markets will do it on their own. If this means he needs to leak stuff out to the Fed, so be it.
The task force is coming
Since we won’t have forward guidance, we will be getting a task force to review everything about the Fed. To me, this means that Warsh really wants to lose the dual mandate; he wants it to only be about price stability, so look for the task force to eventually recommend losing the dual mandate that also includes maximum employment.
But that move will need congressional approval, and I highly doubt he can muster the political support right now to make it happen. Warsh wants new ways to track labor and inflation data, which is fine. For the task force, a big question remains until we read about its findings.
Заключение
I’ll admit my bias against Warsh. And it’s possible that when Президент Трамп leaves office — especially if a Democrat returns to the белый дом — we will get Kevin Warsh 1.0 back.
That said, today’s press event was fine. Warsh can’t be seen as Trump’s boy who does anything to derail dovish policy efforts. The real issue here is that inflation has taken off and the labor market has stabilized.
The 10-year Treasury yield is at 4.50%, and with rate hikes now being priced in, that’s perfectly normal. Can things change six weeks from now when the Fed meets again? Yes, especially with the Iran conflict ending, but we must take it one day at a time.
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