Warsh Is a Hawk in Dove's Clothing, Yardeni Says

Ed Yardeni interprets Kevin Warsh's first FOMC statement as a hawkish surprise, emphasizing price stability and a 2% commitment. He argues the Fed has shifted to a tightening bias, sees bond yields as normalized at 4.5%, and believes modest rate hikes would not derail the resilient economy or the 'Roaring Twenties' equity narrative.

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Metals

USD

housing cautious down

Yardeni Research 4.0
Financial Media
Ed Yardeni 7.5

Warsh Is a Hawk in Dove's Clothing, Yardeni Says

US rates

ndx

Yardeni believes the 'Roaring Twenties' equity narrative continues and modest rate hikes won't spoil it. He sees the economy as resilient, implying a cautiously positive outlook for equities including NDX.

rut

Yardeni's positive view on the 'Roaring Twenties' and economic resilience extends to small caps, though he doesn't mention RUT explicitly. The cautious tone comes from potential rate hikes.

wti

The price of oil is coming down. As you mentioned, the price of gasoline is coming down.

4 calls

+26

reliable positive edge across multiple calls

5/26/2026 2:53:03 PM	medium term down	20 days later	-14.24%	+14.24%
4/13/2026 1:50:50 PM	short term up	6 days later	-1.83%	-1.83%
3/18/2026 6:56:53 PM	short term up	5 days later	-3.94%	-3.94%
3/9/2026 9:00:51 AM	short term sharp up	6 days later	+12.04%	+18.06%

Show all 4 wti results

yields

Bond yield is back to four and a half percent, that's kind of normal. I think the bond yield is normalized.

8 calls

no reliable edge (random outcomes)

5/12/2026 4:35:40 PM	short term cautious up	5 days later	+3.17%	+1.58%
4/14/2026 6:13:54 AM	medium term cautious up	20 days later	+3.13%	+1.56%
3/9/2026 9:00:51 AM	short term up	6 days later	+2.03%	+2.03%
12/23/2025 11:20:27 PM	medium term up	20 days later	+0.85%	+0.85%
12/8/2025 2:52:48 PM	short term up	6 days later	-0.10%	-0.10%
12/8/2025 10:28:17 AM	short term up	6 days later	-0.10%	-0.10%
11/12/2025 11:46:28 AM	medium term cautious down	20 days later	-1.34%	+0.67%
10/27/2025 1:01:15 PM	medium term cautious down	20 days later	+3.77%	-1.88%

Show all 8 yields results

Introduces Ed Yardeni and his characterization of Kevin Warsh as a 'hawk in dove's clothing' who surprised markets by emphasizing price stability and a 2% inflation commitment.

Speaker1
Speaker2

Warsh's message is very Greenspan-like: ambiguous, with occasional surprises. He started with a surprise by committing to 2% inflation after signaling dovishness to Trump.

He mentioned price stability over and over again, and didn't finagle the 2% target at all.
Notes that inflation was mentioned 19 times vs. 4 times for the labor market, with no mention of the dual mandate or labor market weakness.

Speaker1
Speaker2

Warsh may be hoping to be lucky: falling oil/gasoline prices will bring headline inflation down, allowing him to do nothing while signaling productivity as a future reason to cut.

If the recent inflation surge doesn't spread, he may just sit back and let it happen. Right now it may be a do-nothing Fed for a while.
Asks what Warsh's reaction function would be if the labor market weakens.

Speaker1
Speaker2

Warsh has locked himself in: he emphasized price stability so strongly that a sudden pivot to focus on unemployment would be inconsistent. He essentially said price stability is necessary for a healthy labor market.

This is déjà vu all over again—Powell had been saying the same thing for quite some time.
Speculates whether Warsh himself proposed discussing a rate cut at the meeting to later tell the Treasury Secretary he was pushed back.

Speaker3
Speaker2

Acknowledges it's a good conspiracy theory that makes sense, but notes Warsh didn't vote on the dot plot so his position is unclear.
Notes that Deutsche Bank and Citigroup have raised rate hike expectations or pushed back rate cut expectations, and asks if rate hikes would curtail the 'Roaring Twenties' equity enthusiasm.

Speaker1
Speaker2

Does not think rate hikes would spoil the 'Roaring Twenties'—the economy has demonstrated resilience. Bond yields at 4.5% are normal; Fed policy is normalized.

People have been getting bent out of shape about bond yields being back up, but 4.5% is kind of normal. The economy is performing just fine.
Distinguishes between leaving rates alone vs. hiking, and notes Bob Michele of JPMorgan discussed two hikes this year.

Speaker1
Speaker2

The Fed switched directly to a tightening bias at this meeting, which was more hawkish than expected. A 25-50bp hike would not be a big deal and the bond market might rally on it.

In 2024, the Fed cut 100bp and bond yields rose 100bp—the bond vigilantes agreed with me. Last year they cut 75bp and yields are still at 4.5%. Lowering rates hasn't accomplished anything.
Asks about Fed policy on the housing market, noting Warsh said it's restrictive there.

Speaker3
Speaker2

Reducing MBS to zero won't help housing. The Fed doesn't have a rifle, only a shotgun. Less communication from the Fed is fine—he had been calling it the 'Federal Open Mouth Committee'.

There's only so much the Fed can do. I really don't mind less communication.

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