Hawkish Warsh: Rate Hikes Inevitable Despite Iran Deal (with Lisa Abramowicz, Annmarie Hordern)

Adam Posen expects Chair Warsh to be non-committal but predicts a shift to a neutral bias. He argues there is a lot more inflation in the pipeline from tariffs and migration lags, making rate hikes inevitable in late 2026/early 2027. He believes Warsh will prioritize his central banker legacy over political pressure.

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Peterson Institute for International Economics 7.0
Policy Institute
Adam Posen 8.5

Hawkish Warsh: Rate Hikes Inevitable Despite Iran Deal (with Lisa Abramowicz, Annmarie Hordern)

yields

Rate hikes are inevitable. They will hike in December 2026 and January of 2027.

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-8

slightly worse than random

4/8/2026 10:34:05 PM	short term cautious up	5 days later	-0.86%	-0.43%
8/22/2025 9:51:01 PM	medium term cautious up	21 days later	-5.64%	-2.82%

Adam Posen

Chair Warsh is going to say a lot of things that sound deep on monetary policy while not committing to anything. I think they will move the statement to a neutral bias. I don't see any way they rewrite the statement in this amount of time.
Lisa Abramowicz

Do you think he will try to make a bold statement by not putting a dot on the dot plot, or will he try to tow the line?
Adam Posen

I think he will downplay the dots, which is a reasonable communication improvement. But I don't think he will want to rock the committee. He has a legitimate reason to say 'let's wait and see' because of the Iran deal.
Annmarie Hordern

You think they will hike this year. How offsides will this put Kevin Warsh with the Trump Administration?
Adam Posen

There is a lot more inflation in the pipeline from tariffs and migration lags. The labor market has been underestimated. I think rate hikes are inevitable. Chair Warsh cares enough about being a central banker that he will prioritize his legacy over political pressure.
Annmarie Hordern

What do you see as Jay Powell's role given he is sticking around?
Adam Posen

I am surprised former Chair Powell decided to stick around. There must be something we don't see, like the lawfare threat over the new building or the attack on Governor Cook. I expect him to stay totally mum on monetary policy.
Lisa Abramowicz

Do you expect to hear anything on the balance sheet today?
Adam Posen

I expect vague rhetoric on the balance sheet. The most you will get is him saying they will have a study group on it. I don't expect any firm commitments.

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