Former Kansas City Fed president on expectations for Kevin Warsh as new Fed chair

8/25/2025 6:17:17 PM	medium term cautious down	20 days later	-5.26%	+2.63%

Introduces Tom Hoenig as former Kansas City Fed president and former vice chair of the FDIC.

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Asks what Hoenig will be listening for this morning.

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The new Fed chair is being handed a 'can of worms': a very strong economy with inflationary pressures, an 'inflationary boom' entrained since last year's rate cuts and strong fiscal policy, plus the Iran war and inflation breaking out.

Kevin must set expectations early to both the President and the FOMC. His goal is price stability, necessary for maximum employment.

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The yield curve is steepening, which in itself is tightening financial conditions. The Fed should let the curve steep and contain inflationary pressures, leaving rates unchanged and watching carefully.

If inflation becomes more troublesome, the chair must not back down from raising rates, or the market will question his independence.

Asks how FOMC members are thinking about the midterm election year, deficit spending, and the relationship between the Fed chair and the President.

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The deficit continues to grow at $500 billion per quarter. Someone has to buy that debt, putting pressure on the yield curve and on the Fed to help moderate its steepness.

The Treasury is holding long-term debt, not buying it, keeping issuance on the short end. The Fed must send a clear message: 'We are not going to manage the yield curve for you.' This is critical early in the term to maintain the Fed's lead on price stability and long-term maximum employment.

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