Trump Fed chair’s inflation strategy: leave it to the market | Eduardo Porter

📰 source: theguardian_business · 📚 research

in his first press conference as fed chair, kevin warsh declined to signal any rate action, arguing that financial markets themselves could tighten conditions. he said rising long-term bond yields 'provided us some comfort' and that 'the markets have done quite a bit' even as the fed had 'not done much in 42 days.'

the fed's split decision not to raise rates despite inflation running at double its 2% goal sent 30-year treasury yields to the highest in 19 years, and stocks tumbled. warsh has floated holding fewer rate-setting meetings and scaling back press conferences, a practice introduced by ben bernanke.

his hands-off approach may devalue the fed's credibility and leave markets to guess what an opaque central bank will do, likely bringing more volatility and higher inflation.

why it matters: warsh's hands-off inflation strategy threatens to boost market volatility and borrowing costs, leaving investors to navigate an unpredictable fed.

source: theguardian_business
sentiment: -0.30 · impact: 0.60