NPR
3 things to know about the new Fed chief's first meeting
+546 words added -651 words removed
− Scott Horsley
Kevin Warsh chairs his first meeting of the Federal Reserve's interest-rate setting committee this week.
+ Scott Horsley
Kevin Warsh chaired his first meeting of the Federal Reserve's interest-rate setting committee this week.
− With inflation at a three-year high, the committee is expected to leave its benchmark rate unchanged.
+ With inflation at a three-year high, the committee left its benchmark rate unchanged.
− The new chairman of the Federal Reserve, Kevin Warsh, holds his first news conference this afternoon.
+ With inflation at its highest level in more than three years, the Federal Reserve held its benchmark interest rate steady Wednesday, and signaled its next move could be a rate increase. It was the first rate decision under the leadership of the new Fed chairman, Kevin Warsh.
− President Trump chose Warsh to lead the central bank in hopes he would push for lower interest rates.
+ President Trump nominated Warsh to lead the central bank in hopes he would push for lower interest rates.
− But with inflation at a three-year high, that's probably going to have to wait.
+ But a wartime spike in energy prices has pushed rate cuts off the table for now.
Updated forecasts from individual members of the rate-setting committee suggested they expect to raise interest rates by a quarter percentage point this year.
− Here are three things to know:
The cost of living in May was up 4.2% from a year ago.
+ That's a turnaround from three months ago, when the average committee member was projecting a quarter-point cut in 2026.
Warsh did not offer his own forecast of where interest rates are going.
− That's the biggest annual increase since 2023.
+ The new Fed chairman has generally been skeptical of such "forward guidance," fearing that it ties the central bank's hands, even though officials regularly caution that forecasts are just a best guess, not a roadmap for future action.
Consumer prices overall were up 4.2% in May from a year ago.
− And it's mainly driven by the spike in energy prices resulting from the U.S. war with Iran, which snarled tanker traffic in the Strait of Hormuz — a vital energy shipping corridor.
+ That's the biggest annual increase since April 2023.
− Business This is how close American households are to the financial edge Even though oil prices have come down in recent days since the two countries agreed to extend theirceasefire, gasoline prices are still more than a dollar a gallon higher than they were before the war began.
+ A statement issued at the conclusion of Wednesday's meeting hinted that the policymakers are concerned about rising prices.
− Unfortunately, the central bank's inflation-fighting tool — raising interest rates — has little effect on this kind of supply shock, since it doesn't produce more oil or gasoline.
+ "Inflation remains elevated relative to the Committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the statement said.
− But until inflation starts to moderate, the Fed is not likely to lower interest rates. In fact some members of the Fed's rate-setting committee have signaled their next move could just as easily be a rate increase.
+ "The Committee will deliver price stability."
Investors are also betting that interest rates will end the year higher than they are now.
− In March, before the wartime price spike had really taken hold, the average Fed policymaker was projecting one quarter-point interest rate cut this year.
Members of the rate-setting committee will update those forecasts this afternoon, and investors will be watching for any change.
+ The U.S.
− Markets are betting that interest rates will be higher at the end of the year than they are now.
+ war with Iran has snarled tanker traffic in the Strait of Hormuz — a vital shipping lane for crude oil — triggering a sharp jump in gasoline prices. Although gas prices have inched down in recent days in hopes of a diplomatic resolution, AAA says the average price of regular gas in the U.S. is still more than a dollar a gallon higher than it was before the war.
− Economy More people are going hungry now than at the height of the pandemic Economy Summer electric bills sizzle as the cost of cooling climbs Warsh has been critical of the central bank's public rate forecasts — known as the "dot plot." He thinks they limit the Fed's maneuvering room, even though policymakers have said repeatedly, the forecasts are just a guess, not a roadmap.
In general, Warsh thinks members of the rate-setting committee should keep their cards close their vest, and not give so many speeches.
+ While fighting inflation is one of the main jobs of the Federal Reserve, its primary tool is ill-suited to addressing supply shocks.
− But that could be a tough sell for those other committee members who are all independent actors and don't necessarily take their marching orders from the chairman.
+ The Fed typically tries to curb inflation by raising interest rates, but that would do little to ease the strain on global energy supplies.
− "I'm hard pressed to see other members of the [committee] restrain themselves unless they can be convinced that monetary policy would be better made and it's better for them politically to say less," says Sarah Binder, a senior fellow at the Brookings Institution and co-author of The Myth of Independence: How Congress Governs the Federal Reserve.
A lot of Fed policymakers think speeches and op-eds are important tools in their toolkit.
+ Fortunately, the price hikes haven't yet spread widely to other goods and services besides energy.
− Former Fed chairman Ben Bernanke liked to say monetary policy is 98% talk and 2% action.
+ "Core" inflation, which strips out volatile energy and food prices was a more modest 2.9% in May.
− Warsh's immediate predecessor, Jerome Powell, opted to retain his seat on the Fed's governing board after his term as chairman expired last month.
+ Signs of improvement in the job market also weaken the argument that lower interest rates are needed.
− This is highly unusual.
+ After anemic hiring in 2025, U.S.
− Most Fed chairs leave the central bank altogether when their term as chair is over. Powell probably would have done so too, had President Trump not waged such a relentless campaign to bend the central bank to his own will.
+ employers have added an average of 188,000 jobs in each of the last three months.
− Trump tried to fire a Fed governor.
+ In an unusual move, Warsh's predecessor, Jerome Powell, has elected to remain on the Fed's governing board for a period of time, after his term as chairman expired last month.
− He even had his Justice Department launch a criminal investigation of the central bank.
In response to that high-pressure campaign, Powell decided to stick around, to help preserve a firewall between the White House and the Fed.
+ Powell has promised to keep a low profile and not compete with the new chairman.
− While that's potentially awkward for Warsh, Powell has said he plans to keep a low profile and won't try to compete with the new chairman.
+ But his presence is designed to serve as a kind of firewall against undue pressure from the White House to lower interest rates.