SPECIAL REPORT: Was Kevin Warsh's Fed Debut A Hit? Or A Flop? | Axel Merk
Summary
New Fed chair Kevin Warsh used his first FOMC meeting to end forward guidance, shorten the statement, and stake everything on price stability.
Markets read the meeting as hawkish and moved rate-hike odds up, yet long-term yields fell, which the guest calls proof the credibility mission landed.
Warsh launched task forces to review the ample reserves regime, Fed minutes, dot plot, and balance sheet, an ambitious first-month overhaul of Fed operations.
The guest argues a credible, inflation-focused Fed is a headwind for precious metals, but runaway fiscal deficits keep his own gold and silver exposure bullish.
Warsh prioritizes price stability over full employment and would lean on the productivity boom, not market weakness, to justify eventual rate cuts.
Adam Taggart's takeaways
- Top takeaway The host frames Kevin Warsh's first FOMC meeting as a clear break from recent Fed leadership: Warsh anchored himself to price stability, promised to communicate far less, and announced roughly five new committees or task forces.
- He notes the Fed held the policy rate steady as expected, but the market moved its previously-priced December rate hike forward to September, reading the session as hawkish.
- He presses on whether Warsh is effectively deprioritizing full employment, arguing a Warsh Fed is a single-mandate Fed in practice even if Warsh would not phrase it that way.
- He raises the possibility that falling oil prices after the peace deal could give Warsh room to cut rates later in the year despite his hawkish image, since the administration that appointed him wants cuts.
- He asks whether a hawkish Warsh Fed is a reason for precious metals holders to divest, and closes by pushing Axel Merk to reconcile his gold-heavy positioning with his support for Warsh.
Axel Merk's takeaways
- Top takeaway Axel Merk says he was lobbying for Kevin Warsh's appointment and is thrilled with the debut: he believes the first meeting achieved all of Warsh's goals, above all re-anchoring credibility on price stability.
- He endorses Warsh's end of forward guidance, arguing the Fed's constant jawboning deafened it to market signals and made it late by default, and that markets will now price policy off the data instead.
- He reads the market reaction as validation: short-term rates were repriced higher, but the long end of the yield curve fell overnight, which he takes as confirmation the market believes inflation will be brought down.
- He flags as a hugely underappreciated move that Warsh put the ample-reserves regime and the oversized balance sheet under review, arguing for a return to the pre-2008 scarce-reserves system and expecting an MBS-for-Treasuries swap with the Treasury at some point.
- He remains bullish precious metals because of fiscal deficits and an administration expected to double down on growth without restraint, conceding a credible hawkish Fed is a headwind all else equal; he trimmed his gold position somewhat when Warsh became the nominee but says he likely still holds more gold exposure than most listeners, and QE from Warsh would shock him.