Despite the conflict in the Middle East pushing prices higher, the Fed decided to keep rates steady at its most recent meeting. One of the Fed’s mandates is keeping consumer price inflation predictable, targeting a 2% long term rate. Inflation (Core CPI) in June was 2.6% and inflation has been over 2% for more than 5 years.

July marked the second Federal Reserve meeting under newly appointed Chair Kevin Warsh. Since taking office in May, the chair has faced scrutiny as many note a pattern of reduced transparency. Not only has Warsh eliminated forward guidance, but is also reportedly considering reducing the number of meetings a year. While only required to meet 4 times a year, the Fed has maintained its current schedule of 8 meetings a year since 1981. At Warsh’s direction, a specific task force has been created to evaluate communication and how the Fed conveys policy deliberations.

Critics are concerned that reduced transparency from the Fed will create uncertainty and increase volatility in markets. Historically, yields respond to not only the economic data but also how the Fed is presumed to act. For example, bond yields typically raise on expectation that the Fed will raise interest rates.

While Trump and Powell often had a hostile relationship, a recent WSJ article highlights a warmer, more open relationship between Trump and Warsh. As many are aware, Trump has been a vocal proponent of lower rates.

Following the backlash over the most recent rate decision, a recent Financial Times article shed light on candid feedback from sources close to Warsh. The Fed chair has acknowledged communication missteps, including a failure to consistently reinforce the Fed’s key message on price stability.

Looking forward, Warsh has an important speech at the end of August which should provide more clarity into his thoughts and ultimately long-term goals. Warsh’s four year term ends in May 2030.