'Fed Wire' Nick Timiraos: How Kevin Warsh Explains Inflation Will Determine His Path

Odaily News: According to an analysis by Nick Timiraos, a Wall Street Journal reporter known as the "Fed Wire," in his latest article, Federal Reserve Chairman Kevin Warsh's first major speech at Jackson Hole this week will face a core question: Is the persistently high U.S. inflation caused by one-off shocks such as tariffs and wars, or is the economy itself still overheating?

This judgment will directly determine the direction of interest rates, and it is also the biggest divergence within the Federal Reserve. At the July meeting, three officials supported a rate hike, and other officials also signaled the possibility of further tightening, while Warsh has not clearly stated his position. Since taking office, he has deliberately reduced policy guidance, and now the market and his Fed colleagues are waiting for his first systematic explanation of his judgment.

The key to Warsh's term ultimately depends on how he explains why the previous policy failed to bring inflation back to 2%. If the past two years of rate cuts and policies supporting employment were themselves wrong, because the labor market is actually stronger than the Fed judged, then Warsh needs to push for reversing the rate cuts. But this would conflict with the stance of Trump and Bessent, who previously demanded further rate cuts. (WSJ)