Overview
- President Trump said on NBC that Kevin Warsh would not have been chosen if he wanted to raise rates, adding he expects borrowing costs to come down.
- Fed funds futures continue to imply about two quarter-point cuts this year, with investors showing limited conviction in repricing the outlook.
- Goldman Sachs projects rate reductions in June and September and says a major shrinkage of the Fed’s balance sheet is unlikely even if Warsh is confirmed.
- Warsh is viewed as institutionally credible and historically hawkish with recently softer signals, and he would first chair an FOMC meeting in June with one vote among twelve.
- Commentators warn rising federal debt could constrain policy choices, and the Justice Department’s subpoena of the Fed has fueled concerns about pressures on central bank independence.