President Trump has spent his tenure hammering Federal Reserve chair Jerome Powell over interest rate cuts. But when asked Tuesday whether incoming chair Kevin Warsh would deliver the lower rates he's long demanded, Trump pivoted to an unusually hands-off posture.
"I'm going to let him do what he wants to do," Trump said. "He's a very talented guy, he's going to be fine, he's going to do a good job."
The shift is notable given the political backdrop. Market pricing now suggests an interest rate hike this year is more probable than a cut, a prospect that would traditionally rankle a president fixated on easy monetary conditions. Yet Trump seemed willing to grant Warsh operating room even if he leans hawkish.
The remarks hint that Warsh may avoid the relentless public criticism Powell has endured, at least initially. Once installed, a Fed chair operates with statutory independence and doesn't require presidential blessing for policy moves. Trump's language suggests he recognizes that boundary, or is at least willing to observe it for now.
Treasury Secretary Scott Bessent last week predicted one or two more "hot inflation numbers" before "substantial disinflation" sets in. That framing may give Warsh political cover if he opts to hold rates steady or raise them early in his tenure, particularly if inflation spikes are tied to energy disruptions.
The clearest picture of the Fed's current thinking arrives Wednesday at 2 p.m. ET, when minutes from the late April meeting will be released. That session saw four officials dissent, with three wanting to remove language suggesting the next rate move will be downward. The transcript will reveal how divided the committee is on inflation and the path forward.
Market expectations have shifted sharply. The CME FedWatch tool shows virtually no odds of rate cuts in 2025, with 39 percent probability that rates end 2026 at current levels and 60 percent odds of at least one hike by then.
Whether Trump maintains his newfound patience with Warsh depends on how aggressively the new chair acts. A sustained period of held or rising rates could test the president's tolerance. For now, though, he's chosen deference over demands.
Author James Rodriguez: "Trump's sudden willingness to defer to Warsh is either genuine respect for Fed independence or a calculated bet that inflation will crack fast enough to avoid rate hikes anyway."
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