Warsh's Hawkish Tone May Be Empty Rhetoric for Rate Hikes

Kevin Warsh, the new chair of the Federal Reserve's Board of Governors, has kicked off his tenure with a hawkish tone, saying that prices are 'too high.' However, despite this rhetoric, financial writer believes the Federal Open Market Committee (FOMC) will wait as long as possible before hiking interest rates.

Inflation has been above the 2% target for over five years, and consumers are feeling the pinch from soaring oil prices. Warsh has advocated for a 'regime change' at the Fed and has launched several task forces to examine its policy, including one to look at how the Fed measures inflation.

The writer argues that rate hikes are less effective at solving supply-driven shocks, such as the current high gas prices caused by the Iran war. Additionally, raising rates too early poses a risk to the economy and could add pressure on an already resilient yet fragile market.