Kevin Warsh, the new chair of the U.S. Federal Reserve (Fed), was officially sworn in with President Donald Trump looking on. Both Warsh and Trump emphasized "independence" in unison at the inauguration, apparently mindful of the external controversy surrounding the White House's intervention in interest rate decisions.
Warsh formally took office at an inauguration ceremony presided over by Trump at the White House on the 22nd (local time). After taking the oath of office, Warsh stressed, "The Fed's mission is to promote price stability and maximum employment," adding, "When we pursue these goals with wisdom, clarity, independence and resolve, inflation comes down and growth strengthens." He went on to pledge, "We will learn from past successes and mistakes and break free from rigid frameworks and models," and, "I will lead a reform-oriented Fed to fulfill its mission."
In response, Trump told Warsh he "hopes he will be completely independent." While stating that "the administration fully supports Chair Warsh," Trump repeatedly urged him, "Don't look at me or anyone else." The remarks were interpreted as an attempt to preempt the view that his own intentions could be reflected in monetary policy decisions led by Warsh. It is the first time in 39 years, since former Chair Alan Greenspan in 1987, that a Fed chair's inauguration has been held at the White House.
Markets see that while Warsh assumed the post buoyed by Trump's expectations for rate cuts, it will be difficult to immediately pursue monetary easing through measures such as changing the inflation benchmark. Conditions inside and outside the economy are challenging, including rising oil and consumer prices stemming from the Middle East war, the spread of a hawkish (tight monetary policy) stance within the Fed, and former Chair Jerome Powell's continued tenure as a board member. Michael Feroli, JPMorgan's U.S. economist, told The New York Times (NYT), "The Fed will maintain a rate-hold stance this year and begin raising rates next year."
