When the New Fed Chair opens his first Federal Open Market Committee meeting on June 16–17, markets will watch for subtle policy shifts ahead.
Kevin Warsh, the newly minted chairman of the Federal Reserve System’s Board of Governors, will gavel open his first Federal Open Market Committee meeting on June 16. In the meantime, market watchers are preparing for changes the 17th Fed chair is expected to make, which could bring the Fed closer to alignment with President Donald Trump’s policies.
Fed followers are skeptical that Trump will receive the interest rate cuts he vehemently demanded from Warsh’s predecessor, Jerome Powell. After all, U.S. inflation reached 4.2% in May, a three-year high.
Even if there are changes, none are expected before the congressional midterm elections in November.
“We expect that the Fed will keep rates on hold through the end of 2026, but still look for three rate cuts in 2027 if inflation begins to cool as the impact of the Iran conflict and tariffs begins to fall off,” said Gennadiy Goldberg, managing director and head of US Rates Strategies at TD Securities.
The U.S. Supreme Court invalidated the Trump administration’s tariffs in February.
However, the markets should not be lulled into a false sense of relief regarding policy continuity, warned Derek Tang, CEO and co-founder of independent research and analysis firm MPA Macro, as the Fed’s independence may be tested again.
Warsh reportedly plans to reduce the amount of information the Fed provides to the market. Among the changes he is reported to be considering are fewer press conferences and potentially eliminating the quarterly publication of the Fed’s Dot Plot, the anonymized federal funds rate projection of each Fed governor and bank president.
The administration, meanwhile, defines the Fed’s independence as limited to monetary policy. “When it comes to things such as bank regulation or even currency policy, any discretion the Fed had before in those domains is going to be restricted from here on out,” Tang said
A positive note for central bank independence: Warsh will not be able to make any rate changes without the support of his fellow Fed governors. Additionally, Tang noted, the Fed answers to Congress, which has been protective of the central bank’s independence and is likely to remain so.
