Warsh Hikes Rates Upon Taking Office: Inflation Lower, Yet Policy Script Reverses

On September 17, according to public market data, two months before the 2024 presidential election, the Federal Reserve under Powell cut rates aggressively by 50 basis points while core CPI remained as high as 3.3%; two years later, with only two months remaining until the 2026 midterm elections, the Federal Reserve under Warsh hiked rates by 25 basis points even as core CPI fell to 2.4%. Both periods fall in the critical pre-election window, yet the policy direction of the Fed under Powell versus under Warsh has taken a dramatic reversal.

This contrast is particularly noteworthy. Trump had previously advocated for lower rates and chose Warsh to chair the Fed, with markets viewing it as a key personnel move to drive rate cuts. However, Warsh's first rate decision after taking office was a hike. Warsh cited reasons including a strengthening U.S. economy, still-elevated inflation, and geopolitical shifts. Among these, the U.S. strike on Iran and the resulting energy and geopolitical risks have also become factors in the Fed's reassessment of the economic outlook.

[BlockBeats]