Warsh Takes Aim at Inflation with First Rate Hike Decision
A new era at the US Federal Reserve has begun under Kevin Warsh's leadership. Since taking over, he seems to be tackling his role as 'the chaperone who has ordered the punchbowl removed just when the party was really warming up,' a description coined by William McChesney Martin Jr.
The latest move came in the form of a 0.25% federal funds rate hike, which may have been unexpected but is being met with market stability. Bond yields have edged higher, but the stock market has rebounded after an initial selloff, indicating that investors are taking Warsh's decision in stride.
Warsh's goal of avoiding 'forward guidance' about the Fed's intentions is clear, and his refusal to engage reporters on the causes of inflation during his first news conference was seen as a departure from traditional Fed practice. However, his hawkish speech at Jackson Hole in August appears to have rallied support behind a unanimous rate hike decision.