Chair Warsh faces policy tests, the headline announces, like he's a sophomore taking the SATs. The man has been Fed Chair for what, five minutes? Already he gets treated to a hot jobs report in May that apparently "swept aside" the possibility of rate cuts. Swept aside. As if rate cuts were sitting there on the table, ready to go, just waiting for someone to sneeze wrong. They weren't. Everyone knew they weren't. But financial journalists need to write about something between their morning coffee and their afternoon nap.
The jobs report was big. Strong. Hot, even. People have jobs. Companies hired them. This information has rendered Jerome Powell's successor unable to cut interest rates, which he wasn't going to cut anyway, at a time nobody expected him to cut them, for reasons that existed before the jobs report and will exist after it. Breaking news: data point confirms what was already priced in. Retail traders across America just added "Chair Warsh" to their list of people to blame, right below Jerome Powell and right above their own reflection.
Rate cuts sit further out of reach now. How far? The headline doesn't say. Could be June. Could be 2027. Could be never. The Fed meets, looks at charts, pretends the jobs report changed everything, then does exactly what they planned to do six months ago. Warsh faces policy tests. He'll pass them by doing nothing. The market will call it "patient" and "data-dependent." Your uncle will call it "manipulation" on Facebook.
Here's what actually happened: employers hired people in May because they needed workers. The Bureau of Labor Statistics counted them. Financial media saw a number higher than last month's number. Warsh, brand new to the big chair, gets credit for decisions he hasn't made yet regarding problems that don't exist. Meanwhile, seventeen thousand Robinhood accounts just panic-sold their QQQ calls because someone on FinTwit said "Warsh" and "hawkish" in the same sentence.
The possibility of rate cuts has been swept aside, which is devastating news for everyone who thought the Fed cuts rates during strong employment growth and persistent inflation.
Photo by Jonathan Lim on Unsplash
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