Kevin Warsh survived two days of Congressional testimony without saying anything catastrophic. The bar for success keeps getting lower. Next year they'll give him a trophy for remembering his own name.
He faces a rapid test of his commitment to price stability. This translates to: we're about to find out if he actually means any of the sh*t he just said under oath. Congress heard what it wanted to hear. Markets heard what they wanted to hear. Retail traders heard "buy calls" because that's the only phrase their brains can process.
The credibility test arrives fast. Inflation doesn't care about your testimony performance. It doesn't care that you avoided stumbles. It doesn't give partial credit for not f*cking up in front of cameras. Either you raise rates and choke off growth or you don't and prices keep climbing. There's no third option where everyone gets ice cream.
Warsh now joins the long tradition of Fed chairmen who promised to take inflation seriously right before discovering that taking inflation seriously makes people angry. Turns out constituents prefer cheap money to sound money. Shocking development. No one could have predicted this except everyone who has ever studied central banking for eleven seconds.
The technical picture here is crystal clear. A double-top formation in credibility paired with a descending triangle in balls. Support at "doing nothing" remains strong. Resistance at "actually fighting inflation" has never been tested. Volume on promises stays elevated while volume on action trades at all-time lows.
Some guy named Derek in Tampa just bought thirty-year bonds because the Fed chairman seemed nice on TV. Derek thinks testimony equals policy. Derek will learn the difference between words and actions around the same time he learns that a 6% mortgage rate wasn't actually expensive.
Photo by Marek Studzinski on Unsplash
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