Kevin Warsh chairs his first Federal Reserve meeting in June. The Fed will probably hold rates steady. This is newsworthy because a man showed up to work and did the same thing the previous man would have done.
The headline promises implications for "your money." Your money sits in a savings account earning 4.2% or whatever number makes you feel like a genius for clicking "transfer" on your bank's website. The rate will stay 4.2%. You will continue to feel like a genius. The Fed has performed a miracle: convincing millions of people that not changing something is a form of leadership.
Warsh replaces Jerome Powell, who spent four years either raising rates or lowering rates or holding rates steady, each time presented as a calculated masterstroke of monetary policy. Warsh will now do one of those three things. Analysts will call it Warshian or hawkish or dovish or data-dependent, which are four ways of saying "he picked one of the three options."
The real story is what this means for consumer borrowing. Your credit card rate, currently 27%, will remain 27%. Your auto loan, currently unaffordable, will remain unaffordable. Your mortgage rate exists in a parallel dimension where the Fed funds rate is a suggestion, not a law of physics, so that's staying put too.
Retail traders are refreshing their brokerage apps waiting for Warsh to signal the next move. They have convinced themselves that parsing his syntax will unlock alpha. The man will say "data-dependent" twelve times in the press conference. They will buy calls on the word data.
The leadership change could mean absolutely nothing for your money, which is the most likely scenario, but that would require acknowledging that Fed chairs are interchangeable components in a system designed to move interest rates one-quarter point at a time while everyone pretends it's brain surgery.
Photo by Andrew Dawes on Unsplash
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