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Real-time News
On January 30th, Trump turned the selection process for the Federal Reserve Chair into a game show, with Kevin Warshs ultimate victory being arguably the most unexpected choice. This decision is bound to exacerbate market volatility and may displease all parties, including Trump himself. This nomination will first trigger a strong cognitive conflict on Wall Street and in policy circles. Although Trump promised to choose a Fed Chair capable of implementing loose monetary policy, Warsh has always been considered a hawk. This background will make it difficult for Warsh to build credibility. If he chooses to cut interest rates, the market will see him as abandoning principles and submitting to Trumps puppet; if he maintains high interest rates for too long, he will inevitably clash with Trump quickly, which in itself will trigger market volatility. Before Powells term ends, Warshs "shadow term" has already begun, potentially leading to confused policy signals and market misinterpretations. Intriguingly, Warshs victory seems to stem from a "survivors logic." When the Trump team lost interest in Hassett, he became the only remaining option. Until December of last year, Hassett was still the top favorite in the forecasting market, but concerns that his nomination could drive up bond term premiums, coupled with warnings from Wall Street executives that someone too close to the president should not be in charge of an independent central bank, eventually changed the situation.On January 30th, Federal Reserve Governor Waller stated that the current interest rate range is 3.50%-3.75%, and monetary policy should be closer to a neutral level, which he believes is around 3%. Despite robust economic growth, the labor market remains weak. Waller expects last years weak employment data to be revised downwards, reflecting near-zero job growth in 2025. He stated that he has heard of several companies planning layoffs in 2026, and therefore is quite skeptical about job growth, warning of a significant risk of a sharp deterioration in employment. Regarding inflation, Waller pointed out that the inflation rate excluding tariffs is close to the Feds 2% target and is on track to reach it. Although inflation has risen due to tariffs, he believes that given that inflation expectations have stabilized, monetary policy should ignore these temporary effects. Waller voted against a 25 basis point rate cut at this weeks meeting, arguing that current policy is still excessively suppressing economic activity.Federal Reserve Governor Waller: Monetary policy should be closer to a neutral level, which is likely around 3%, while the current interest rate range is 3.50%–3.75%.Federal Reserve Governor Waller: Despite robust economic growth, the labor market remains weak.Federal Reserve Governor Waller: Expects last years weak jobs data to be revised downwards to reflect near-zero job growth in 2025.
