The Federal Reserve has a new leader who talks tough

The Federal Reserve has a new chair, and he's already on a collision course with the White House.
Kevin Warsh presided over his first meeting this week, holding rates steady but sending an unmistakable signal — inserting into the statement that "the committee will deliver price stability." The phrasing draws a sharp line against predecessors who routinely bailed out Wall Street or cut rates to juice growth, often with little regard for inflation or the dollar's value.
Warsh has room to be tough. The U.S. economy is humming in mid-2026, with unemployment at 4.3 percent and steady growth; the Fed's own statement noted that "productivity growth and capital investment are strong." That strength gives Warsh the luxury of asserting his anti-inflation credentials early.
And inflation is likely to be higher regardless. Even if the fragile Memorandum of Understanding between Iran and the U.S. holds, the supply shortages triggered by the closure of the Strait of Hormuz are likely to show up in the data within weeks.
Trump wants lower rates before the November midterms. He's likely to be disappointed. Nine of the members are forecasting a rate hike before year-end. The Fed forecast for PCE inflation rose to 3.6 percent from 2.7 percent. Barring a sudden economic collapse or a stock market crash on the scale of 2008 or 1929, this Fed will not cut rates in 2026.
History offers a cautionary parallel. When Alan Greenspan took over as Fed chair in 1987, he hiked rates several times — only to watch the Dow plunge 20 percent in a single day on October 19. Greenspan responded by flooding Wall Street with liquidity, sparking a rebound and giving birth to what became known as the "Greenspan Put”; the now-deep-rooted belief that the Fed will always rescue markets in a crisis. That belief has proven accurate again and again in the decades since.
Given that history, the smart money should bet that Warsh, when his first real test arrives, will abandon the price-stability mantra and fall back on the Greenspan model.
We'll find out soon enough whether this is genuinely a new direction for the Fed — or just more of the same.

Hilliard MacBeth

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