Comments for Inflation Watch

Comment on Warsh’s War On Inflation Starts With Jawboning by Dr. Duru

Dr. Duru — Thu, 18 Jun 2026 17:10:01 +0000

In reply to Gary H.

There is just zero credible way to get to rate cuts….and even less so now than at the beginning of the year.
And imagine if Powell and the FOMC DID cut rates earlier this year. There would be a mad scramble to undo at least one cut and then for good measure undo one or two more!

I forgot to mention that my take from the press conference commentary is that Warsh suspects the balance sheet’s size is providing too much liquidity for financial markets. But I would like to hear him state his opinion directly on this one.

Comment on Warsh’s War On Inflation Starts With Jawboning by Gary H

Gary H — Thu, 18 Jun 2026 15:20:52 +0000

In reply to Dr. Duru. That's an adequate reason for doing it. Another would be to get a sense of support for it, maybe find any hiding doves. Regardless of who put it on the table, I guess what was found was... crickets :-}.

Comment on Warsh’s War On Inflation Starts With Jawboning by Dr. Duru

Dr. Duru — Thu, 18 Jun 2026 15:10:47 +0000

In reply to Gary H. Oh man. That would be hilarious if Warsh was talking about his own rate cut proposal! Surely he would have only made it to provide evidence to the President that he tried.

Comment on Warsh’s War On Inflation Starts With Jawboning by Gary H

Gary H — Thu, 18 Jun 2026 14:28:44 +0000

Two comments:
-1-
Warsh mentioned that the Fed has two tools: the FF rate, and the size of their balance sheet. The former primarily affects short-term rates; the latter, long-term rates. Warsh also mentioned (and admitted it was the only example he could point to) housing market rates are restrictive. Certainly, lowering long-term rates improves that market, because mortgage rates effectively determine housing affordability. So, will the Fed start purchasing LT treasuries, which until recently it had been selling?

-2-
«When asked whether there was any discussion of a rate cut, Warsh dismissed the idea quickly: “There was one proposal on the table. There was no discussion of any other proposals. The discussion on that proposal was, I would say, quite limited. The group was unanimous and unambiguous on it.”»

I think it is probable that the rate cut proposal was a Miran leftover… but it is also possible that Warsh himself put that proposal on the table.

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