市场预期新美联储主席沃什的利率路径

Today, I'm thrilled to welcome you to the white House for the swearing in of our new chairman of the Federal Reserve Board of Governors, Kevin Warsh. For people who have been just trying to get by in this economy, this upcoming Fed meeting might be a little bit of a disappointment. There's not much the Fed can do in the very short term to bring down those interest rates. When we look out a little bit further into the future possibility of a hike, but I think the biggest thing is that the market's going to be looking for is how is the Fed going to communicate?

Kevin Warsh seems to have some very different ideas about communications than have existed at the Fed previously. I think what he wants is the Fed being less a part of the everyday life of markets and investors. So the Federal Reserve has a pretty complicated job. It has to do two things at once with only one tool interest rates. The two things are making sure that the economy is producing as many jobs as it reasonably can.

And the other is make sure that prices are relatively stable. What the Fed has to do is decide, do we want to keep interest rates where they are, or do we want to try to put a thumb on the balance either way. When it comes to employment, we've seen those jobs numbers look a little bit better. Job creation was spreading around different sectors of the economy. One of the reasons why the jobs market may be doing well is that the Federal Reserve cut interest rates a bunch of times last year.

The president said something surprising. Mr. President, about the latest inflation number which came out this morning. Could that be a concern? No, I love it. The numbers were great. This is a little surprising because those numbers were pretty high. Prices generally in the economy rose by more than 4%. Usually the Federal Reserve wants it to be about 2%. Traditionally, the Federal Reserve has looked at something that's called core PCE.

It takes out things like energy. What the fed is trying to do in looking at this one number, is trying to say we're concerned about not just what's happening right now, but what we think is going to happen, what's going to be the overall trend in the economy. Now we have this new guy, Kevin Warsh, the new incoming fed chair, who has a different view. I think the data that's being used to judge inflation is quite imperfect data.

The measures I prefer are looking at things that are called trimmed averages, where we take out all of the tail risks, all of the one off items, and we ask ourselves whether the generalized change in prices is having second order effects on the economy. There are some reasons to be pretty cautious about using the trimmed mean right now. It actually was really slow to pick up on the pandemic inflation. The trimmed mean usually sends a reliable signal about where overall inflation will trend.

At the moment, however, my staff's research cautions against putting too much stock in low readings of the trimmed mean. He's really got a fair level of dissension, and he's going to be sitting across the table from his predecessor, Jay Powell. Warsh does not want the Fed to go into the meeting already decided what it's going to do. The downside of this is if the markets go into the meeting not knowing what the Fed's going to do, it creates a lot more potential volatility around the meetings.