Kevin Warsh will do everything reasonably possible to avoid raising rates. That may sound odd given the overwhelmingly hawkish interpretation of this week’s FOMC meeting, but I came away with a different impression.
Contrary to most (all?) of the FOMC summaries I read so far, I did not find Warsh’s press conference particularly hawkish. Warsh is trying to restore the Fed’s inflation-fighting credibility while preserving as much policy flexibility as possible.
Talking tough about inflation is not the same as wanting to raise rates. If inflation continues to moderate and energy prices remain under pressure following recent geopolitical developments, I suspect he would much rather keep rates unchanged than tighten further.
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