{"text":[[{"start":5.6,"text":"This week, Kevin Warsh will chair his first interest rate-setting meeting as the new Federal Reserve chair. Over the next four years, his decisions at the helm of the world’s most important central bank will shape not only economic conditions, but also the future direction of the institution. "}],[{"start":22.5,"text":"US President Donald Trump has repudiated decades of precedent with his attacks against former chair Jerome Powell for not cutting interest rates. In his confirmation hearing, Warsh was duly dogged by questions about his fealty to Trump. Now that he is chair, he has the chance to prove himself. He must choose long-term market stability over short-term political concerns."}],[{"start":45.45,"text":"In normal times, this week’s Fed decision would be uneventful. Recent weeks have seen strong job numbers and annual consumer price index inflation rise to 4.2 per cent in May — a three-year high. Warsh would be wise to vote with the majority of the board, which is widely expected to hold rather than cut rates, not only because it is the most rational interpretation of the data, but because it will signal his commitment to institutional independence. This week’s meeting and press conference will set the tone for what markets will expect from his tenure."}],[{"start":78,"text":"Warsh has the ability and the obligation to act independently. Even if he does run afoul of the president, it will be hard to remove him from his post, as failed crusades against Fed governors Lisa Cook and Powell have shown. "}],[{"start":93.05,"text":"So what should we expect from a Warsh unbound? His statements over the past year have highlighted AI’s disinflationary impacts, referenced measures such as trimmed means, which imply lower inflation, and indicated a preference for cutting rates. This dovish coo has been music to Trump’s ears — but Warsh could change his tune. His posture might have been tactical, to help him get the job."}],[{"start":116.69999999999999,"text":"Warsh has been both hawkish and dovish. Under Democratic President Barack Obama, Warsh was a noted hawk, fighting for higher rates in the immediate aftermath of the global financial crisis and criticising Fed purchases of bonds and mortgage-backed securities. During Trump’s first term, with unemployment at record lows, Warsh and his former employer Stanley Druckenmiller argued against tightening. When the Federal Reserve cut rates under President Joe Biden in September 2024 after inflation had come down, Warsh called the decision “puzzling”. This suggests a worrying partisanship."}],[{"start":151.85,"text":"That his tenure as Fed chair is not influenced by such partisan leanings is crucial. Yet even if he is balanced in his decision-making, Warsh faces a difficult path ahead. Inflation risks loomed even before the Iran oil shock; AI could increase unemployment or even lead to demand destruction. "}],[{"start":172.54999999999998,"text":"Warsh has stated that he favours shrinking the Fed’s $6.7tn balance sheet. But quantitative tightening risks triggering liquidity crunches and could be difficult to pull off, with US Treasury markets looking shaky. A critic of forward guidance, Warsh is reportedly considering eliminating the Fed’s “dot plot”, which signals the views of officials on the rate path. Such a change may provide greater policy flexibility, but risks reducing transparency. Above all, Warsh must project stability and even-handedness in times of tumult."}],[{"start":205.5,"text":"Warsh’s tenure will be judged by the unforgiving voices not of op-eds and commentary, but of the markets. He has criticised past Fed committees for being too focused on lagging data, and not focused enough on establishing institutional credibility. Now, credibility will be his to build or lose."}],[{"start":228.65,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781481358_7269.mp3"}