Will Kevin Warsh Squander A Huge Opportunity?

In his first three months on the job, Kevin Warsh has firmly chosen not to use the bully pulpit that comes with the title of chair of the Federal Reserve, even as he’s hinted at an ambitious agenda to reshape the institution.

That could change this week when he takes the stage in Jackson Hole, Wyo., in his inaugural remarks for the central bank’s storied annual conference — his first official speech in his new role.

His comments will attract viewers from around the globe, including, no doubt, a certain resident of Pennsylvania Avenue who is keen to see interest rates go down. But Warsh’s most important audience on Friday is probably the one that will be physically in the room with him: his fellow Fed policymakers, who are increasingly divided on how to proceed in their fight against inflation and potentially skeptical of some of his plans for reform.

Even as Warsh has declined ample opportunities at press conferences and congressional testimony to shed light on his plans, many of his colleagues at the Fed have continued to lay out their expectations for how the economy will unfold and what policy might be warranted. They’ve filled the silence left by Warsh and also fed the perception that he is leading from behind.

Three Fed officials were already ready to raise rates in July and more may join them at the central bank’s next policy meeting in September, given new data showing that inflation is not yet abating.

In other words, he can’t avoid the debate much longer. It’s time to build a case for whatever he thinks should come next and wield some of his power.

It’s possible, of course, that Warsh might still cleave to the vagueness that has characterized his early tenure. Certainly, he’s unlikely to reveal whether a rate hike is coming next month, as he’s made abundantly clear that he’s not in the business of telegraphing such things.

But making a public argument, at least about the current state of the economy if not what the Fed should do to shape it, is one of the central bank chief’s most important levers for building consensus. The vista of the Teton mountains that has loomed over several Fed chairs before him might coax him to pull it.

William English, a former top staffer at the Fed who is now a professor at Yale University, noted several benefits to seizing on Jackson Hole for a more sweeping statement to his assembled colleagues.

“You probably have a bit more room to lay out your ideas in an orderly way,” he said. “A conversation on the phone, it’s a little harder to do that, so I think it is an opportunity, a bit more formally, with a bit more elbow room, to make the case that you want to make.”

English also noted that making an argument publicly can make it slightly harder for other members of the Fed’s rate-setting committee to disagree with an opinion that the chair has publicly staked out, particularly at an institution that prizes collegiality and collaboration.

One reason why Warsh’s view of the world is of such intense interest is that he is navigating a bewildering mix of global events that get stranger by the week. Anything about how he assesses what the world looks like today would be instructive.

When he was nominated by President Donald Trump early this year, the Fed was already facing inflation that had been above its 2 percent target since 2021 and tariffs that were unpredictably buffeting prices.

Since then, the U.S. has entered into a war with Iran, upending oil markets and further pushing up inflation. The Silicon Valley money spigot pouring into artificial intelligence infrastructure has lifted stocks to new records, and the economy continues to grow at a healthy pace.

Job growth turned negative in July, but it’s unclear whether that’s a problem given the stream of Baby Boomers who are retiring and the sharp downshift in immigration. Unemployment remains low at 4.1 percent.

Just in the past week, Treasury Secretary Scott Bessent undertook a preliminary (and controversial) effort to nudge down long-term borrowing costs for the U.S. government, even as Warsh’s consistent message is that he wants the cleanest market pricing, with as little Fed messaging as possible, to tell him what’s going on in the economy.

When it comes to prodding his colleagues in one direction or another — I don’t pretend to know whether he’s inclined to hold or hike in September — he could begin by laying out his level of concern about recent information on inflation, and why. After all, that’s the central question when it comes to whether and how quickly the Fed needs to act.

Markets are pricing in at least one rate increase by December, according to CME’s FedWatch tool, although the latest price increases are tame enough that it might give the central bank more room to wait.

There is no clear path forward that avoids both the overheating of inflation and the overcooling of recession. And nobody said the Fed chair’s job was easy.

But it’s Warsh’s job nonetheless, along with the 18 other members of his rate-setting committee who already have their opinions and may or may not be open to his persuasion. Jackson Hole is as good a place as any to finally put down a marker.