Federal Reserve live coverage: Fed holds interest rates steady amid political pressure – Yahoo Finance
Wall Street is starting to weigh in on President Trump’s decision to nominate Kevin Warsh to lead the Federal Reserve.
And a few themes are emerging from the reaction.
First, Warsh is seen as a safe pick. Relatively.
“President Trump’s apparent pick of Kevin Warsh for the next Fed Chair would arguably be one of the better outcomes for investors compared to the other contenders that had been in the running,” Stephen Brown, deputy chief North America economist at Capital Economics, in a note on Friday.
“Warsh’s long-running hawkish views should help to counteract concerns that he might morph into a full-blown Trump stooge. That said, his firm conviction that both AI and the Trump administration’s regulatory push will help to hold down inflation, as well as his longstanding view that the Fed should operate with a much smaller balance sheet, present the risk of some upward pressure on long-term bond yields. … For now, the big picture is that Warsh seems like a relatively safe choice.”
Second, because of Warsh’s time on Wall Street and previous experience at the Fed, there is a “degree of comfort” with the choice, according to Wells Fargo.
“We know from our many client discussions that there appears to be at least some degree of comfort with a Warsh led Fed vs. the other choices,” wrote Wells Fargo economists in a note on Friday.
“But, we all should be mindful that there is also some degree of uncertainty associated with this pick if for no other reason than his public remarks on the economic outlook and the appropriate path for the federal funds rate have been fewer and farther between than the other finalists.”
And third, there are skeptics who view Warsh’s previous hawkishness — i.e., preference to raise rates, or keep them elevated, rather than cut rates aggressively in a bid to life inflation — presents a longer-term challenge given Trump’s clear preference for lower rates.
“If you get a few cuts now to appease the President, you may well get tougher hikes later,” wrote Neil Dutta, head of economics at Renaissance Macro. “Moreover, because Warsh has been a policy hawk his entire life, his newfound dovishness looks very suspect.”
