4-30-26 The Fed Is Splitting Apart Ahead of Warsh’s Reign

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[00:00:00]the Fed yesterday. It was a non-eventful meeting for the most part. I mean, this was Jerome Powell's last speech as the chairman. Kevin Warsh will take over from here. Powell is stepping down. He will remain with the Fed as a governor.

[00:00:11]They didn't hike rates. They didn't cut rates. They held things where they were, as expected. But, the the most interesting aspect was was the number of dissents that came through from that meeting. I guess the way I would describe it is the most uneventful eventful meeting I've seen from the Fed.

[00:00:27]No one cared about what Powell had to say about monetary policy because he's not going to be the Fed chair at the next meeting. So, at the next meeting in 6 weeks, Warsh will be the chair. What was eventful is that he said he's going to linger on as a governor. So, he will get to vote, and we know where he stands. He's not hawkish, he's not dovish, but he's not going to vote for a rate cut or a rate increase. And it sounds like that's applying a little bit of political pressure to the administration. Basically, I'm going to stick around until you completely drop the case against me, Chairman Powell.

[00:00:59]So, I I think if those cases are dropped, Powell will wander off into the sunset and retire like he said he wants to do. The dissenters were more interesting. So, one of the dissenters was Steven Mnuchin, who has been dissenting since he's been at the Fed for four five meetings now cuz he wants the Fed to cut rates. He voted for a 25 basis point rate cut. But, there were three other dissenters. They were fine with rates being steady. They voted for no change to rates. They had a problem with a line in the statement. When you dissented, I always thought the dissent was about action, whether it was QE, QT, or changing interest rates. They dissented because there was a line in the statement that they didn't agree with. And it said, "The committee is attentive to the risks to both sides of its dual mandate." So, basically, what that's saying is we know that the labor market's weak. We know that oil is creating inflationary pressures. There's risks that the economy could weaken, potentially to a recession. And there's risks that inflation could pick up because of oil and then all the other things that oil impacts. To me, it sounds like a very fair statement. We're in a we've called it the fog of war, sort of. We don't know how things are going to end up. We do know the economy was weak before we started with Iran.

[00:02:13]So, it was a very balanced and measured statement to make. There's risks on both sides.

[00:02:18]>> don't agree that there's risk on the downside. They do not support the inclusion of an easing bias in the statement at the time. So, they considered the fact that it was balanced, that we may have to cut rates as an easing bias. The fact that it came up at this meeting is Federal Reserve political. They're starting a battle because they think Warsh is going to come in and want to lower rates. So, I think they're trying to position themselves as not only do we not want to lower rates, but we're thinking about raising rates.

[00:02:47]>> The number of dissenters is going to increase. Four is well above average.

[00:02:51]That's most since '92. Catch [music] me daily on the Real Investment Show. The link is in the description.