The new chairman’s preferred inflation gauge is different from the one the central bank currently uses
KEVIN Warsh has been confirmed as the new chairman of the US Federal Reserve. Is there a risk that under Warsh, the Fed may be unduly influenced by the government, losing its independence? What might this mean for bond investors?
Warsh has stated he is committed to the independence of the US Federal Reserve Open Market Committee (FOMC). Under his leadership, the rate-setting body will, in operational terms, remain free from political interference.
But his reassurances need to be balanced against his persistent criticism of the central bank. Warsh has deep reservations about several aspects of the Fed’s approach to setting interest rates, from the inflation data it uses to the way in which it provides rate forecasts, echoing some of US President Donald Trump’s own misgivings.