The Fed Chair Who Whispers: Kevin Warsh’s “Lean Messaging” Is Anything But: LAUGH OF THE DAY
The striking disjunction between what’s on the label vs. what’s in the can with respect to the Kevin Warsh communications story. It turns out the new Fed Chair does want to guide the market, just not on the record. Which leaves the rest of us to guess which “people familiar with his thinking” are actually familiar with his thinking:
Caudia Sahm says, rightly:
Claudia Sahm: <https://x.com/EconBerger/status/2085352416200003738>: ‘Warsh is the Fed Chair. We should all be familiar with his thiking. We should not have to rely on anonymous sourcing…
This is à propos of:
Claire Jones & Kate Duguid: Kevin Warsh to Stick with Lean Fed Messaging Despite Market Backlash <https://www.ft.com/content/debe096f-ec89-424f-a8ca-d3843ef53549?syn-25a6b1a6=1>: ‘People close to Warsh said he acknowledged that he had made mistakes in his first 10 weeks…. People close to Warsh noted that market-based measures of inflation expectations remain low and have fallen back in recent days…. President Trump’s repeated attacks on… Powell…have… complicated the new Fed chair’s efforts to convince investors that he is a committed inflation fighter. Warsh would be prepared to raise interest rates at September’s meeting if inflation readings released in coming weeks are hot, and markets ratchet up their expectations for increases in borrowing costs, the people familiar with his thinking said…. Interest rates remain the primary tool [of monetary policy] for now — and would be used at forthcoming meetings if needed, the people added…
First, one has to strike a note of amazement at the most extraordinary self-undermining of a headline and a lead by a story: sending people “familiar with your thinking” and “close to you” out to talk to the press about your thinking is neither “lean Fed messaging” as the headline says, not is it a “stripped-back communications style”, as the lead sentence claims.
One has to imagine someone, either the headline writers or the reporters, or maybe all of them, chortling together at the disjunction between what is on the label and what is in the can with respect to this story.
And we have, added:
Guy Berger: ‘It’s good that Warsh is abandoning his opposition to (Delphic) forward guidance and talking to the press, though it would be better if he also did it at the press conference…
So it turns out that Kevin Warsh is not opposed to forward guidance being carried out by “people familiar with his thinking”; he is only opposed to attaching his name to it, I think because attaching his name to it would then anger either the markets or Trump, while if it is done through others he has some plausible deniability when either markets or Trump come after him. But having to guess which of the people claiming to be “familiar with his thinking” is actually, you know, familiar with his thinking may be the worst of the nearby timelines.