r/finance • u/businessinsider • 10d ago
Kevin Warsh calls for a 'quieter Fed' and less forward guidance in first Jackson Hole speech as chair
https://www.businessinsider.com/3-takeaways-from-fed-chair-kevin-warsh-jackson-hole-speech-2026-8?utm_source=reddit&utm_medium=social_manual&utm_campaign=reddit_dist_r_finance&utm_content=manual_v1&utm_term=f1e96229•
u/copperblood 10d ago
We are so fucked.
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u/Is12345aweakpassword 10d ago edited 10d ago
Ah yes, incredibly opaque institutions are famously behind the most stable governments in history
Soviet Union and Russian Republic, Imperial Japan, DPRK, literally everything going on with France in the late 18th century, all great inspirations,
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u/Micksar 10d ago
Dude was like “the Fed is DONE giving you forward guidance so you can place your bets on the next stock market move! But also, the Fed has work to do to bring inflation down. BUT that’s not forward guidance! I swear! Who knows what we’ll do in September?!? But also- we need to do something to get this inflation down soon.”
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u/aquagardener 10d ago
He has no fucking clue what he's doing. We're all barreling to another economic crisis that'll cripple millenials and everyone younger than them for good.
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u/majorflojo 10d ago
He knows exactly what he's doing.
We are just on the wrong side of the trade.
Like always.
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u/Far_Exam_699 10d ago
A good chinese open source model and his voice will get another level of tremble
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u/psychohistorian8 10d ago
what is the right side of the trade?
where should my money be right now
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u/Popular-Row4333 10d ago
In assets, like owning a home.
Basically anything boomers are doing, because they won't feel the inflation like someone under 40 would
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u/Malora_Sidewinder 8d ago edited 8d ago
If anyone could give you an answer to this question, they would be 10xing their net worth in the next handful of years.
Sans crystal ball? Most people would do well to diversify as best they can, including some hedges that run negative beta (ie inverse-index etfs)
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u/phoenix823 10d ago
Just because he is pushing while the Treasury Secretary is pulling doesn't mean this will end poorly..
oh fck
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u/FourScoreAndSept 10d ago
They’re pulling in the same direction behind the scenes, Warsh hasn’t done anything but talk, “we’ll someday maybe have to do something”
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u/Lower-Condition-4104 10d ago
But ya know what? Buy the stock market because it doesn’t give af about anything except going up always
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u/Mental-At-ThirtyFive 10d ago
It is all fiscal domination now, not 100% monetary
a 5% wealth tax to fund buybacks ala Bessant will do us good
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u/SRMT23 10d ago
Does anyone have a substantive reason why they think Warsh is fucking up? From what I understand, forward guidance isn’t universally agreed to be helpful among the economists.
I hate Trump as much as the next person with an IQ above room temperature, but it feels like people just want to hate Warsh without a real reason.
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u/cheapskateskirtsteak 10d ago edited 10d ago
He is in a very delicate position. We should be raising rates, but tightening liquidity will likely burst the AI bubble. Also high rates means our debt keeps ballooning. If rates stay steady, or fall, runaway inflation.
Suffice to say the FED doesn’t really have any tools left in its belt. Treasury and Legislative policy are gonna be the things that can fix this and uh, hm, oh, well looks like the treasury is paying off our credit card with another credit card.
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u/BrigadierGenCrunch 10d ago
This is exactly why I hate how over the years the sole focus has been on the Fed. They are one component of this and should function more as guardrails or a backstop.
Congress is supposed to be the primary component and now more than ever needs to exercise physical discipline. But I’m not holding my breath.
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u/FluffyCup8934 10d ago
Well like, yeah, but nobody wants Congress to act.
A serious conversation about the deficit includes all of
(1) The military (2) Medicare (3) Medicaid (4) Taxes
And all of those are third rails.
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u/Malora_Sidewinder 8d ago
You can only cut the military budget so much (read: slightly) before the reverberations are felt in the national economy to a noticeable degree, given how intricately entwined it is with so many companies and entire sectors.
Your best bet to reduce military spending would likely be a series of aggregated third party reviews of budgetary inefficiencies that then take into account top military leadership opinions (several of the us navy Admiralty under Obama addressing congress and requesting a smaller number of more-modern or modernized ships, and the us army general pleading with congress for no more new tanks under bush senior shortly before congress signed an acquisition for 400 new tanks both come to mind).
This would limit the economic reduction that would come, but would presumably take years if not the better part of a decade to come to fruition, and I can only imagine it would be both difficult and expensive to undertake in the first place.
Im not saying that it isn't worth doing; ive been in favor of such an approach for a long time, but there is no way to simply wave a magic wand and say "poof! Military budget cut by 30%!" Without it doing far more economic harm than good.
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u/FluffyCup8934 8d ago
Everything you said is correct but
You can only cut the military budget so much (read: slightly) before the reverberations are felt in the national economy to a noticeable degree, given how intricately entwined it is with so many companies and entire sectors.
The same applies to social security and healthcare. Both of those drive aggregate demand. As will increasing taxes.
Point being, there's not some easy way out where there are no-consequences.
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u/Malora_Sidewinder 8d ago
Economics-driven policy is often akin to asking "which sword looks the least uncomfortable to swallow" lmao. Limiting harm is the name of the game, not avoiding it.
At least to anyone that knows what theyre talking about.
I support raising taxes on corporations and top earners, as well as a flat wealth tax every ~5 years on households above an arbitrary cutoff of net worth valued in held appreciating assets, with graduations so the number increases with wealth. ( admittedly I'm not married to this last idea because it's not tested, and I would be open to changing my mind in response to evidence provided suggesting it wouldn't do any good).
Im fully aware that doing so would drive short term economic contraction and spike unemployment, but see my first sentence.
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u/Sufficient_Sense_663 10d ago
The real tool is taxes need to be raised on high earners but nobody wants to actually do that.
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u/mwdeuce 10d ago
You don't even need to tax "high earners", just people that have an obscene amount of wealth. It's common knowledge that people worth billions are doing Olympic level gymnastics to avoid paying their share of taxes, the Panama Papers made that much clear.
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u/Sufficient_Sense_663 10d ago
I agree the extremely wealthy need harsh penalties, but anyone making 500K + should pay a lot more without any loopholes.
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u/FluffyCup8934 10d ago
Unfortunately the extremely wealthy have tons of tools to avoid taxation.
So it's the 150k+ crowd (90th percentile income) carrying ~70% of the federal burden.
With your 500k+ crowd (~99th percentile) carrying about 35%.
So we can (and probably should) increase that share. But as a point of fact, the US actually has a relatively narrow tax base.
As an old boss told me, every tax cut is a tax cut for the rich. The rich pay all the taxes, though they also make all the money.
Other tools include increasing the working age high earner population, ideally with people who are temporary and won't burden old age programs... Though reddit hates h1bs.
You can also have SS and Medicare invest their endowments through a swf, in the Canadian / Nordic model.
But overall most of the suggestions here are cases of 'i want my cake and and I want to eat it to'
When any solution will involve real sacrifice, at least in the short run.
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u/pr0v0cat3ur 10d ago
$500K as a household or individually? Because a $500K household should not burden more taxes.
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u/Malora_Sidewinder 8d ago
My (2 person) household is making about $350k anually, gross. You could quadruple our taxes and im not even sure we would have to ratchet back on spending at all, it certainly wouldn't affect our lifestyle by much.
Anecdotally, of course. I cant speak for anyone but myself and we may well be an outlier.
Edit- wait did you mean 500k income anually or NET WORTH, because if the latter your statement is much less objectionable and I agree entirely
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u/pr0v0cat3ur 8d ago
I meant earning $500k. HCOL, kids, pets, it adds up. $500k is not a lot in a HCOL area.
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u/Malora_Sidewinder 8d ago
Its a lot in something like 95% of the populated areas of the us, its not a lot in like alpine nj.
I dont live in an inexpensive area by any stretch of imagination, if youre making an extra $150k beyond my household? You can afford higher taxes, substantially so. It not, venture to say you're already living beyond your means in the first place, which is a personal failure.
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u/pr0v0cat3ur 8d ago
It might be helpful to avoid personal attacks. You lack context and have constructed a rather elaborate narrative.
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u/DrySea8638 10d ago
Agreed. And I just don’t believe this idea that liquidation of a small amount of their wealth to pay taxes on those massive unrealized gains would hurt the economy or stock market. They could absolutely put together predefined cash out events/triggers that are spaced out and prevent massive single day draw downs that tank stocks.
It’s not like these ultra wealthy don’t already kind of do that or don’t have capable financial savvy experts or can help. That money would then flow back into the market anyways.
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u/pennychase 10d ago
It's better to not go to wars!
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u/Sufficient_Sense_663 10d ago
Why not both?!
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u/pennychase 10d ago
It's too easy to tax people! Let's not encourage governments to think that way because they don't need to take responsibility for their fok ups/poor decisions like war. Also, I don't belong to the rich but at same tax level rich people pay more in value. Are people wanting to increase the tax percentage the richer one is? If so I believe that is unfair.
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u/AfraidHomework 10d ago
Many people want to do that including everyone in the DSA as well anyone who is uber progressive
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u/Agreeable-Ad574 10d ago
Why would the AI bubble burst off of a 25-50 bps hike?
AI demand won’t suddenly slow down bc financing is more expensive
I think ppl rlly underestimate the levers companies have to pull
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u/popeshatt 10d ago
Well, the AI stocks are all overleveraged as fuck. Doesn't take much to set off a downward spiral like we've been seeing lately.
Also, higher rates lower stock prices, especially for growth stocks.
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u/cheapskateskirtsteak 10d ago
It isn’t really a demand thing(though speculation faaaar outpaces demand). So much money is held in AI stocks that the second people need it they will just panic sell
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u/Agreeable-Ad574 10d ago
That’s a poor assumption with a weak premise unfortunately.
Who are largest holders of these companies? Retail buyers that will panic when … debt comes due? When they can’t pay their bills so they need to liquidate a position large enough that consequentially triggers a market crash?
Like what will actually trigger shareholders to liquidate?
And what are companies doing to make sure shareholders stay holders?
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u/ProfessorCaptain 10d ago
No, they don’t. Remember when all of Reddit agreed jpow was doing a horrible job and fucking everything up and then did a 180 cause of some memes and now he walks on water?
Reddit is not a good gauge and it’s absolutely a hive mind.
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u/oregon_coastal 10d ago
Powell did make some debatable moves.
But they were pretty open about it.
This is starting to smell lole the corruption/grift fest that has infected everything else is seeping into the fed.
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u/ConditionHorror9188 10d ago
Does it?
Warsh affirming the 2% inflation target is not something Trump would have wanted.Warsh is not necessarily wrong in his view.
The Fed is not magical - they make their decisions based on the same info everybody else sees. Forward guidance could be argued to smooth out changes but it also means the Fed gets painted into a corner when the world changes.I’d argue that forward guidance has become not transparency so much as spin
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u/ireliawantelo 10d ago
Sounds exactly like what I heard from the same crowds when Jpow was appointed.
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u/oregon_coastal 10d ago edited 10d ago
Who said that about Powell?
He was a fairly banal choice. Probably the most status quo choice possible, really. And actually turned out to be quite adept. He navigated some trying times quite effectively. Including a middle finger to the Administration, which every fed chair should also do in those circumstances.
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u/ireliawantelo 10d ago
Was not the sentiment during the lead up and early point of his time as chair.
Especially not on reddit.
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u/PricklyyDick 10d ago edited 10d ago
I saw almost zero discussion about him until covid and I don’t think it’s crazy there were doubts about anyone in the unprecedented position he was in and everything that was happening.
Not to mention his comment on inflation being transitional became pretty infamous at the time. It wasn’t until we avoided a 100% “guaranteed” recession in 2023 that opinions about him changed and people started talking about a soft landing.
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u/fordatgoodstuff 10d ago
Nobody does. Fed Governors respond to the same data that the market responds to. Listening to forward guidance on top of the already-presented primary data just compounds the market’s response. Their mandates are pretty clear - stable inflation and maximum employment. If people can’t deduce what Fed policy will be when digesting CPI, PCE, NFP, or geopolitics that’s their own fault.
All this causes is market volatility, which is not a long-term economic issue.
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u/mp0295 10d ago
I know. It really only came into being in the in the early 2000s, and the most strong form of it (dot plots) in 2012.
I'm not even saying it's good or bad, but I disagree that wanting to reduce forward guidance is an extreme outlier idea.
Personally, I think removing dot plots is good, but he is going too far in the other direction
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u/nter12345 10d ago
Depends on your definition of fuck up. He does not get extra authority on the fomc so the fed funds rate is still set by the full committee.
What he does control is official communication and transparency. For years now transparency was thought to help stabilize the markets but Walsh believes that by doing this the Fed made themselves market movers which masks the true market consensus.
On a personal level he got this job from Trump by promising to lower rates. To do this he is cherry picking the one inflation metric that is indicating inflation is at the fed target (trimmed mean). Further, he is arguing that ai will be disinflationary (which is not a wild belief among economists) so they can preemptively lower rates. This completely ignores the short term inflationary effects the hyperscalers are having on the market.
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u/SRMT23 10d ago
Great summary
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u/nter12345 10d ago
Thank you I have to give credit to the inside economics podcast that does a fantastic job breaking all these kinds of things down
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u/Agreeable-Ad574 10d ago
His speech sounded pretty hawkish-ish though. Made it quite clear he doesn’t expect inflation to go down without action. Other ppl within the fed express the same sentiment.
And if u dig into the numbers, inflation is extremely stick from a demand perspective. Current rates are doing nothing tbh.
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u/nter12345 9d ago
Agree it’s difficult right now. Data centers aren’t really based in financial reality, gas prices are fucked from the crack spread from the war in Iran, and anti-immigration is inherently inflationary toward labor costs.
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u/tombrady011235 10d ago
Transparency from the federal reserve is a good thing. And open communication from the Fed is helpful. Being quiet is antithetical to transparency and openly communicative from such a consequential decision making body
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u/SRMT23 10d ago
I don’t necessarily disagree, but I see the logic in abandoning forward guidance so the Fed can be more flexible and not feel like they will surprise the market when they need to change course. Can’t you predict how the Fed will act from the FOMC voting? Forward guidance just doesn’t feel like a game changer.
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u/tombrady011235 10d ago
How would giving less forward guidance mean fewer surprises
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u/mp0295 10d ago
The argument is that, ultimately, the Fed can't see the future either, so the surprises are going to happen either way. However, the market gives too much credit to the Fed's projections and it lulls them into a false sense of security, resulting in insufficient hedging of interest rate risk
For example, the argument is SVB under hedged interest risk on the basis of the, in restrospect, completely wrong Fed dot plots. And if those plots hadn't existed, they would have properly hedged.
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u/_ceedeez_nutz_ 10d ago
If you listened to warsh, part of the issue with forward guidance is you’re setting market expectations on somewhat unreliable data(think about how large the revision swings have become with bls data). So if you tell the market “we won’t raise rates because the economy is good and unemployment is low” but then a month later the bls revisions come in and they undercounted unemployment by 100k, then you’re in a tricky spot because the economy isn’t as strong and unemployment is higher, but you’ve already told the market you don’t expect to do what you now might do, creating even more uncertainty than if you didn’t give guidance in the first place
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u/SRMT23 10d ago
Warsh’s logic, from what I understand, is that forward guidance makes the market over react when the fed goes against its own forward guidance. Someone correct me if I misunderstood that.
I’d be interested to see if someone studied the impact of forward guidance on Fed policy and the markets.
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u/pr0v0cat3ur 10d ago
The POTUS moves markets with a single tweet. Is it not better to get accurate information from the fed?
Why change now when we have a proven record that markets like predictability and stability?
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u/ireliawantelo 10d ago
Forward guidance was just allowing the big fish to load up on positions while the economically illiterate public couldn't capitalize on it, making the game even more uneven than it already is. At this point, I 100% agree with Warsh that the fed should be alot quieter more often.
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u/beefcake105 10d ago
I don’t understand why he wants less meetings and less forward guidance. Why all the sudden do we want these major changes? Like keeping the markets open longer, for example?
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u/nameless_pattern 10d ago
Less details publicly available, more gambling against billionaires who have access to private details
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u/burnthatburner1 10d ago
Didn’t he just make comments indicating future hikes? So much for “no forward guidance.”
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u/beagle_2498571 10d ago
These fuckers are weakening the government so they can allow big corporations to run fucken wild all over the working class.
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u/Popular-Row4333 10d ago
Don't worry, it will only affect your entire future with inflation if you are under 40 or have kids.
Inflation is a tax on your future, all those assholes thay pushed MMT should be disgusted with themselves.
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u/Mindless_Season_194 10d ago
Less Data, cooked books, and complete acceptance of corruption moving forward. Those market swings should be fun!
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u/Sea_Damage9357 10d ago
“I’ll do whatever insane nonsense Trump tells me to do.”
Stock up on guns and water everyone. It’s going to get bad.
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u/StevieWonder557 8d ago
BREAKING: The US government is now running a primary budget deficit of -3.59% of GDP, the largest among major advanced economies.
The primary budget deficit EXCLUDES the $1.1+ trillion in interest payments on existing government debt.
This is followed by the UK at -3.51% of the country’s GDP.
Belgium, France, Austria, and the Euro Area run primary budget deficits of -2.14%, -1.97%, -1.66%, and -1.40%, respectively.
In other words, even excluding the cost of servicing existing debt, which is the 2nd-largest US government expenditure, even larger than defense spending, the US deficit is the biggest relative to GDP among all major advanced economies.
US deficit spending is out of control.
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u/windycityinvestor 10d ago
Way to spook the markets bud
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u/Micksar 10d ago
Someone had to. This market has ignored so many flashing warning signs just because earnings have been stellar. Economic policies that are elevating earnings are fucking everything else.
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u/windycityinvestor 10d ago
Not arguing with you and agree. But all this talk before this meeting and then what he said.. he kind of ate some shit
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u/Choice-Impression-54 10d ago
Less transpracy and more back door dealing. They need to in 2030 remove this fed chair.
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u/Mental-At-ThirtyFive 10d ago
I like this if it leads to 75bps+ stair climbs up/down instead of this sleepy 25bps escalators.
It will keep the heart muscles healthy by heating hard
Go big and keep quiet - says Warsh
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u/hahajizzjizz 10d ago
There's not going to be hikes this year. His "hawkish" description of the inflation in the US, coupled with his word play about going hiking at the beginning of the speech, and no forward guidance all just highlight his inexperience and signal that he's learning on the job. He's hoping the uncertainty and lack of guidance will do the work for him. That's his literal strategy for keeping inflation in check. As if after all these years it will correct itself by itself just because the fed is being coy. That's stupid.
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u/alvinovitchq 8d ago
Honestly, I’d rather see the Fed focus on the actual data than constantly trying to manage market expectations.
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u/Additional-Ad4110 10d ago
Rates have been going up. I don’t know what will happen with inflation, but Powell set it up so inflation can rise at the same time as rates. Warshs first move can’t be to crash the markets by spiking rates high and causing deflation. My guess is he will slowly raise rates, as close to the breaking point as possible, without causing deflationary periods. Without the betting market there’s really not much else you can make money on.
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u/businessinsider 10d ago
TL;DR: Kevin Warsh used his first Jackson Hole keynote as Fed chair to argue for a “quieter Fed,” less forward guidance, and a stronger reliance on real-time data over monthly jobs and inflation reports. Business Insider’s Allie Kelly reports that Warsh also reaffirmed the 2% inflation target while framing AI as a potentially major new driver of productivity, with AI tokens and pricing models on the Fed’s watch list.