Warsh Will Get More Leeway From Trump When It Comes to Rates, Rubenstein Says

David Rubenstein argues that Fed Chair Kevin Warsh has political leeway from President Trump to avoid aggressive rate hikes. He sees residual inflation from Iran/oil and AI-driven dynamism, but believes the Fed can wait another quarter before acting. Rubenstein expects Warsh to reduce Fed transparency and forward guidance, following a Greenspan-like approach.

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David Rubenstein 9.5

Warsh Will Get More Leeway From Trump When It Comes to Rates, Rubenstein Says

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Rubenstein says oil prices have been up due to the Iran war but 'are probably going to recede,' implying a cautious downward trajectory over the medium term as geopolitical tensions ease.

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Rubenstein acknowledges residual inflation and says the Fed 'can wait another quarter' before raising rates, implying a cautious upward bias on yields in the short term if the Fed eventually acts.

Asks whether current inflationary pressures from AI and business dynamism require higher rates.

Speaker1
Speaker2

Kevin Warsh has a mandate from President Trump not to raise rates much; he will wait as long as possible before raising.

ECB raised rates, other central banks are raising, but the Fed did not raise at the most recent meeting. Trump has more confidence in Warsh than in Powell, giving Warsh leeway.
Asks whether AI-driven inflationary pressures are sticky and require a policy move.

Speaker1
Speaker2

Inflationary pressures from the Iran war and oil prices are real but likely residual; the Fed can wait another quarter before deciding to raise rates.

Oil prices have been up but will probably recede. Warsh is smart, has Trump's confidence, and will have more leeway than Powell did.
Challenges whether Warsh's mandate from Trump means he is not truly independent.

Speaker1
Speaker2

Warsh is independent and strong-willed, but Trump relies on him more than Powell; Warsh will do what the numbers indicate.

Trump has known Warsh and his family for a long time. Warsh will effectively control the Fed process and the Fed will go along with him.
Asks about Warsh's performance: no dot plot, no forward guidance, five task forces.

Speaker1
Speaker2

Warsh thinks the Fed should be less transparent, following Greenspan's approach rather than Powell's; expect fewer press conferences and less guidance.

Greenspan gave no guidance for 18 years, Bernanke gave some but less than Powell. Warsh is one of those who believe the Fed should be less transparent.

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