Warsh Struggles to Escape Powell's Inflation Legacy
The Federal Reserve is struggling to break free from the challenges faced by its predecessor. Despite new Chairman Kevin Warsh's efforts to mark a 'new chapter', his tenure has been marked by continuity rather than novelty.
A year ago, Jerome Powell's Fed was grappling with above-target inflation and weak jobs numbers, fueled by tariffs. The situation has not improved significantly since then. Inflation remains high, with the latest consumer-price figures showing a 3.4% year-on-year increase in July.
This has led to dissent among rate-setters, with some advocating for higher interest rates. Markets now peg the odds of a hike at the Fed's next meeting in mid-September at around 40%. However, employment numbers have also been weak, with America shedding 23,000 jobs in July and previous months' gains revised sharply down.
The situation is further complicated by Donald Trump's attempts to interfere with the Fed's independence. His efforts to fire Governor Lisa Cook over alleged wrongdoing on mortgage paperwork were blocked by the Supreme Court last year. The White House has since reiterated its consideration of firing her, citing 'baseless' allegations and a clear precedent set by the court.