<\/p>\n
Warren Buffet sums up new Federal Reserve Chairman Kevin Warsh in two words:\u00a0<\/p>\n
\u201cGood choice.\u201d<\/p>\n
But wait. There\u2019s more.<\/p>\n
First, a very short history lesson.<\/p>\n
President Donald Trump nominated Warsh in January to replace Jerome Powell as the head of the world\u2019s largest central bank.\u00a0<\/p>\n
Warsh, a former Fed governor and Stanford University scholar with strong ties to Wall Street, took over the role in May after a somewhat turbulent Senate confirmation process that focused in part on the Fed\u2019s independence from political interference by the Trump White House.<\/p>\n
\u201cI will tell you what I\u2019ve said to the president repeatedly and said to the Treasury Secretary: They chose an independent guy to do the job and that\u2019s exactly what I plan on doing,\u201d Warsh told the Senate Banking Committee July 15 while delivering the semi-annual Monetary Policy Report to Congress.<\/p>\n
Earlier that same day, Berkshire Hathaway\u2019s legendary investment guru told CNBC that he approved of Warsh\u2019s performance during his first seven weeks at the helm of the Fed and beyond.<\/p>\n
\u201cHe cares about the country,\u201d Buffett said. \u201cI think that\u2019s been true of a good many. It doesn\u2019t mean their decisions are always great, but because sometimes the decisions are so tough.\u201d<\/p>\n
Buffet backs “regime change” by Fed’s Warsh <\/p>\n
As I\u2019ve reported, Warsh has launched a host of strategies to overhaul the central bank\u2019s processes on monetary policy and bank regulation.\u00a0<\/p>\n
A longtime champion of Fed reform, Warsh has consistently referred to these tactics as a \u201cregime change.\u201d He plans to establish five task forces of former central bankers, academics, and industry experts to develop a new framework that features upgrades based on artificial intelligence and other data-driven economic models.<\/p>\n
Financial markets await the outcome with some anxiety.\u00a0<\/p>\n
Not the Oracle from Omaha, though. He’s cool.<\/p>\n
\u201cI think he will do the best he can at achieving the job he was assigned to do, which is 2% inflation and maintaining maximum employment,\u201d Buffett said.<\/p>\n
Berkshire Hathaway’s investment legend Warren Buffet backs new Federal Reserve Chairman Kevin Warsh, shown, saying he’s a “good choice” to lead the world’s largest central bank.<\/p>\n
Tom Williams / Getty Images<\/p>\n
Buffet supports Warsh’s leadership<\/p>\n
President Trump was outraged when Powell refused to bend to his repeated demands to slash interest rates dramatically to 1% or less, in an attempt to lower borrowing costs on everything from the credit cards in your wallet to the $39.42 trillion national debt.\u00a0<\/p>\n
He repeatedly attacked Powell professionally and personally \u2014 calling him \u201ca moron\u201d \u2014 and vowed he would only nominate a replacement Fed Chairman who followed his lead on monetary policy. Trump has since walked back those comments and left Warsh alone \u2014 for now.<\/p>\n
Buffet expressed confidence in Warsh\u2019s leadership through the current global crisis as well as the rest of his term as chairman.<\/p>\n
\u201cHe can\u2019t be perfect at it, and just like I know I couldn\u2019t be perfect at taking people\u2019s money and earning super returns on it,\u201d Buffet said.<\/p>\n
Iran war resets Fed interest-rate bets<\/p>\n
Warsh\u2019s nomination in January came at a time when Main Street and Wall Street were expecting the Fed to slash benchmark interest rates by as much as three times this year due to the resilient economy and a stabilizing labor market.\u00a0<\/p>\n
Then the U.S.-Iran war erupted in February, sending oil prices soaring across the globe and hitting affordability-weary Americans at the gas pump and in their electric bills.<\/p>\n
Economists, traders, and other Fed watchers began spinning and resetting forecasts and bets that the huge and unexpected rise in prices would require the central bank to hike short-term borrowing costs to quell rising price pressure across the global supply chain.<\/p>\n
Monetary policy: Delicate balance of prices, jobs<\/p>\n
The Fed\u2019s dual mandate from Congress requires maximum employment and stable prices.<\/p>\n
Lower interest rates support hiring but can fuel inflation.<\/p>\n
Related: Cooler inflation delivers big win for Fed interest-rate bets<\/p>\n
This risks fueling further inflation, potentially leading to an inflationary spiral.<\/p>\n
Higher rates cool prices but can weaken the job market. This increases the cost of borrowing and further stifles economic activity.<\/p>\n
Fed holds interest rates steady <\/p>\n
The rate-setting Federal Open Market Committee voted unanimously last month to hold its benchmark Federal Funds Rate target in a range of 3.5% to 3.75%.\u00a0<\/p>\n
But the minutes of the June FOMC meeting showed some hawkish policymakers concerned about increasing inflation risk and the short-term impact on interest rates.<\/p>\n
A change in the funds rate triggers moves in short-term borrowing costs ranging from credit cards to auto loans and influences longer-term rates such as mortgages.<\/p>\n
Traders adjust Fed interest rate-hike bets\u00a0<\/p>\n
Consumer and wholesale prices dropped in June, reflecting a dip in oil prices that surged from the energy shock of the Iran war. Note: Those headlines emerged amid a dramatic military escalation by both the United States and Iran that revived oil and inflation jitters.\u00a0<\/p>\n
Following Warsh\u2019s two days on Capitol Hill and the June inflation reports, futures traders reset bets to nearly 90% that the FOMC would hold rates steady again at its July 28-29 meeting.<\/p>\n
September is a coin toss, with the CME Group FedWatch Tool also penciling in a 51% chance of a rate hike then, as well as a more than 70% probability of a rate increase by the end of the year.<\/p>\n
Related: Fed\u2019s Warsh faces tough interest-rate smackdown in Congress<\/p>\n
#Warren #Buffet #delivers #powerful #2word #judgment #Feds #Warsh<\/p>\n","protected":false},"excerpt":{"rendered":"
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