Will New Fed Chair Kevin Warsh Lower Rates?

Added: 2026-05-27

[00:00:00]Kevin Walsh confirmed last week, now installed as the country's chief central banker. He handpicked by Donald Trump with one mission, which was to bring down interest rates and not be a too late Jerome Powell, who was a thorn in Donald Trump's side. All presidents want their Fed chairs to bring down interest rates. It's the way it goes. And I think that actually Kevin Walsh over the last year as he was auditioning for the job and make no mistake he was auditioning for the job as he was auditioning for the job he kept going around earnest think tanks and the International Monetary Fund and uh groups of high netw worth individuals making the case for why it was time to reduce interest rates and the possibility that America the American economy was ready for a reduction in interest rates. Bang. He gets into the job and what's the first thing that he's going to do, Anthony?

[00:00:53]>> I think he's in a tough spot, by the way. So, I mean, you know, do you think he's going to lower rates right now? Cuz that would really freak out the bond market. So, >> I think he might even have to raise rates >> possibly. But I think the first thing, you know, uh, yeah, it's a political job. We like to say it's so independent and so forth. I mean, he's being accused by Elizabeth Warren of being a sock puppet for Donald Trump. I guess I guess he's going to do very little in the beginning and probably write some speeches and probably leave rates where they are. Even if he needs to raise them, I don't think he's going to raise them because of the uh overwhelming political pressure not to >> from the White House.

[00:01:33]>> Yeah. But Caddyy, when he was brought into the White House last week, this is the first time a Fed chair was sworn in at the White House since Ronald Reagan swore in Alan Greenspan uh way back in April of 1987. Of course, uh a few months later, 6 months later, we had the stock market crash, 22.8% decline in October of 1987.

[00:01:58]Uh do you believe Donald Trump? Donald Trump looked over at Kevin Worsh and said, "Uh, I want you to just go and do a good job, Kevin, and I want you to be independent." And then you saw the guppies.

[00:02:10]>> What do you need to do?

[00:02:11]>> And then the guppies were clapping like, "Oh, you see he's you really believe that? Do you believe that?"

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[00:03:19]>> I don't believe that for a second. I mean, Donald Trump, he's no dummy. He can see what's happened to gas prices.

[00:03:25]I'm sure he doesn't go around and fill up the beast very often with gas, but if he did, he'd have heart failure because it would cost him so much money. But he has enough people around him telling him that gas prices are high. I was, you know, I filled up my car in Washington last week. I was stunned. Petrol was at $6.50 a gallon. I mean, that's super high for Americans. It's not very high for Europeans, but it is very high for Americans. Um, and he knows that. He knows that people are not happy about the gas prices. He knows they're not happy about inflation. And when he says the fact that he turns to Kevin Walsh and says to him, "Okay, you can be independent. You do, Kevin, what you need to do," completely different by the way, from what he said to J. Pal, which was bring down interest rates. I think it is a reflection of the fact that even Trump realizes that Walsh is in a difficult position and may not be able to bring down interest rates. And if he's looking at the polls, there was an extraordinary CNN poll out just recently showing he's 70% disapproval of Donald Trump's handling of the economy. In his first term, he never got below 50% disapproval of his handling of the economy. So in that 70%, that's not all Democrats. There are some independent and swing and possibly even Republican voters in that 70%. Right.

[00:04:43]>> That's a pretty low modern number. I mean, we're down at Herbert Hoover levels. But let's just talk about a few things that Kevin Walsh will likely do.

[00:04:53]Number one, he's got to give a speech.

[00:04:56]And I think he gives a speech that tries to differentiate himself from PAL.

[00:05:01]Doesn't want to be a PAL clone. So, he's going to probably talk about restraint or a doctrine of restraint. I think number two, I think he's got to take an opinion on the oil shock. Uh, and my guess is knowing Kevin, he's going to look through the oil shock and not chase it. But I think in the speech, he's going to say that we've got to reset the dot plot in June. And just for people listening, what is the dot plot? They have inflation, expected inflation, and then actual inflation. And these are dots on their economic their econometric model. And then based on the data they make decisions on rates. And I think he's just got to simply say that the March plot that they've been looking at is quite stale now. It was written before crude peaked at $138 or at least Brent crude peaked there. So I think he's got to get into that with the people and explain to them that he's modernizing this. And I think he's got to signal to people that listen, I'm looking past the oil shock. You're going to get at least one cut this year. And the goal is to cut twice in the first quarter of 27. And I think if he says that, uh, he's not going to get overly criticized for that cuz that's really what the market is seeing. Okay. And so that's where I think he's going. And I think if he says that, I think he gets Trump off of his back pretty early. So those are some of the things that I think he will do. Uh and the last thing Caddy is that uh if you go back to the 1996 1999 uh productivity study uh that Alan Greenspan commissioned. So Greenspan was like we're having massive productivity gains in the economy as a result of the internet. Let's call that web one. And so Greenspan took the position that that was deflationary. that technology typically brings prices down and I think Wars is probably going to pull that playbook out.

[00:06:59]>> Yeah.

[00:07:00]>> And he's probably going to deploy that playbook.

[00:07:03]>> I don't know that he will commit to cutting rates this year. Uh I think that will depend slightly on what does happen even if he doesn't want to talk about it with oil and that depends on the Straits of Hormuz. If we are really now only entering another 30day ceasefire and we're not going to get to even negotiating the opening of the Straits of Hormuz until the end of June, that is knocking up against the midterm election. So let's see what he does about that. I think he's going to commit to a quieter Fed. It's something that he has talked about a lot where the Fed is not on the front pages all the time.

[00:07:34]Maybe good luck with that. It depends on how Donald Trump takes to him and whether he manages to keep Donald Trump happy. I think you're right. He's going to talk about an AI productivity boom.

[00:07:42]has been talking about this a lot and making the case for the strength of the American economy and bringing down rates based on that AI productivity boom.

[00:07:51]We're going to be talking about that in our bonus episode for our founding members because actually there is starting to be a big political story around AI. It is not just the pope that is talking about AI um and ringing some alarm bells. You're starting to get college campuses where AI is being booed every time it's mentioned by speakers, whether it's in terms of productivity or creativity. You're getting um in certain states where there are a lot of data centers, you're getting huge push back from voters left and right against the data centers. People don't like living to them. They make this loud humming noise. They drive up electricity costs because they consume so much energy. I think data centers could be a sleeper issue in these midterm elections in the states where they're being built. So he may have to be a little careful in the way that he talks about AI. That may be something that American politicians are just going to have to start to moderate a little bit on. But whatever Kevin Walsh says, it doesn't get to the fact that Donald Trump um is suffering and he's suffering because he failed to deliver on the promise he made the American people. Voters get upset when they think that a president isn't doing the job that they elected them to do.

[00:08:58]Look at Barack Obama. In 2010, he was massacred in the midterm elections because he had spent from 2008 to 2010 focusing on health care and Americans had elected him after the financial crash to come in and do something about the economy and to stimulate growth and to stimulate jobs and to rescue them for the financial crash and he focused on healthcare instead. And it really cost him in terms of the midterm elections and political capital. And I think that's what you're getting. And the worrying signs, and this is not just one poll, the problem for Donald Trump is that you're seeing it in repeated poll.

[00:09:32]There's a CBS poll showing that he's even underwater with white non-ol educated voters, only 46% approve of the job that he's doing.

[00:09:41]That's his base. He cannot be underwater with that group of voters and hope to do well. Now, maybe he doesn't care. But when he is talking about Iran and he's talking about the reflecting pool and he's talking about the ballroom and he's talking about the arc to Trump, it's no surprise that you've got the Wall Street Journal writing editorials saying that he's lost the governing plot. But I mean, maybe you're right, Anthony. He doesn't care. Maybe he doesn't care about any of that. He cares about the fact that his family is making money, his cronies are making money, but it's not good for the country.

[00:10:11]>> I don't think he cares. He He wants to make money and he wants to leave monuments to himself in Washington. He's decided that he stuck a finger in everybody's eye in the establishment and he wants to continue to do that. But here's another irony that I think we should point out to viewers and listeners is that Kevin Worsh is an establishmentarian. And when you go to the people that were in the swearing in ceremony, they were all establishmentarians. Okay? Condisa Rice who wrote that big letter for him and put out all those big recommendations on social media has been at the Hoover Institute with him. He had Stan Ducken Miller there who he's worked for. Uh my mentor Ken Langon, the founder of Home Depot who was on the board of the New York Stock Exchange and the board of General Electric. He's he's now 90 so he's more or less in retirement. They were all there and I like that. I'm going to tell you why I like that.

[00:11:09]Because I know guys like Dr. Miller and Langon and they would be telling somebody like Kevin Walsh, hey man, you don't want to come across as an Erdogan sock puppet employee of Donald Trump. You don't want people to think uh that he's now captured the money the way Erdogan did in Turkey where you're experiencing 73% inflation. So >> and Walsh will outlast Trump, right? He knows that.

[00:11:39]>> No question. No question.

[00:11:40]>> He knows that Trump is there for two years and he's there for another 3 years after that.

[00:11:43]>> This is one of those weird things about Washington Caddy where the establishment got Trump. And what do I mean by that?

[00:11:50]George Walker Bush, Jeb Bush, Mitt Romney, Glenn Ynan, any one of those as quote unquote the Republican president would have picked Kevin Worsh. Bill Clinton, believe it or not, would have picked somebody like a Kevin Worsh. you know, he reappointed Allan Greenspan.

[00:12:09]And so, this is one of those things about Washington where the players played Trump and got themselves the person that they wanted uh as Federal Reserve. And so, I wish him Godspeed. I like Kevin and I want to see him do well. I know you have a personal relationship with him. And to me, I I I think he's a very competent, safe pair of hands. But that doesn't mean that he's not going to be tripped up by the current supply shocks that are in the marketplace because of the Trump Iranian war. He's going to have to have a political mantle of steel because just because Trump likes him now doesn't mean that Trump won't turn against him. Trump appointed J Pal and turned against J Pal. Trump appointed Chris Ray as director of the FBI and then he turned against Chris Ray. He's quite capable of deciding at the flick of a switch that he doesn't like somebody anymore. And he'll give Kevin Walsh a certain amount of leeway because he wants to show everybody that he made the right choice.

[00:13:08]But Walsh is going to have to have figured out, and I'm sure he's been having conversations, in fact, I know he's been having conversations with people before he was sworn in, how to deal with Trump, were Trump to turn against him.

[00:13:20]>> I think this is the point. He's an establishmentarian and like Pal and Ray, a gun could get turned to him. We'll have to see what happens.

[00:13:28]>> Okay, we're going to leave it there. If you would like to hear more about ICE and the detention centers, that story has not gone away. Um, and it is really important, I think, to keep on it the situation in those detention centers, the conditions in those detention centers, and how members of Congress are being turned away from trying to do their due oversight from those centers.

[00:13:48]We'll talk about that in our episode with our founding members. And as I mentioned, we're also going to be talking about AI, which is becoming a political hot potato in the run-up to these midterm elections. Of course, you can become a founding member by joining us at the restispoliticsus.com.

[00:14:02]We would love to hear from you. Bye, guys.