Warsh Hikes Rates Immediately Upon Taking Office: Inflation Lower, Yet the Policy Playbook Reverses

BlockBeats news, September 17: According to public market data, two months before the 2024 presidential election, the Federal Reserve under Powell cut rates sharply by 50 basis points while core CPI was still as high as 3.3%; two years later, with only two months left before the 2026 midterm elections, the Federal Reserve under Warsh instead raised rates by 25 basis points while core CPI had fallen to 2.4%.

Also in a critical pre-election period, the direction of Federal Reserve policy under Powell and under Warsh has staged a dramatic reversal. This contrast is especially intriguing. Trump had previously advocated lower interest rates and chose Warsh to serve as Federal Reserve Chair, and the market once viewed this as an important personnel arrangement to promote rate cuts. However, Warsh's first interest rate decision after taking office was a rate hike.

The reasons Warsh gave included a strengthening U.S. economy, inflation that remains too high, and geopolitical changes. Among them, U.S. strikes on Iran and the resulting energy and geopolitical risks also became one of the factors for the Federal Reserve to reassess the economic outlook.