New Fed Chair Kevin Warsh Promised a Policy "Regime Change" to Defeat Inflation When He Took Over in May 2026. Has He Delivered?

In Washington, you often hear the phrase, "Personnel is policy." It's the idea that the people a president chooses for major jobs will have enormous sway over how policy is made. And it's no less true for the Federal Reserve, the most powerful central bank on the planet and one capable of moving markets and asset prices.

Kevin Warsh became Fed chair on May 22 of this year, promising to conduct monetary policy differently from his predecessors, most notably from Jerome Powell, whom President Trump came to dislike after he was reelected.

Federal Reserve Chair Kevin Warsh. Image source: Federal Reserve.

And despite Trump's calls for the Fed to lower interest rates, Warsh has sounded more like a monetary policy hawk, promising a "regime change" at the Fed to tackle inflation. That means he's focused on the Fed's mandate for low and stable inflation rather than on boosting employment.

That's very appropriate, most economists and Fed watchers say, as headline inflation was 3.5% over the past 12 months (as of June, the latest reading available). Even when you exclude volatile food and energy items, which is known as core inflation, prices rose 2.6% over the past year. That's well above the Fed's long-term target of 2%. Meanwhile, the labor market has remained resilient, and unemployment sits at a very low 4.2%.

So, has Warsh delivered on his inflation-killing regime change? The best answer is probably "not yet."

Warsh's plan is dependent on newly created task forces

Warsh's current plan revolves around five task forces he's created to examine areas central to monetary policy. They are:

1. Communications: Review how the Federal Reserve conveys policy deliberations and decisions amid uncertainty.
2. Balance Sheet Policy: Examine the costs, benefits, and institutional implications of the Federal Reserve's current balance sheet regime.
3. Data: Improve the quality and timeliness of real economic signals that inform the Federal Reserve's policy judgments.
4. Productivity and Jobs: Assess the economic impact of new general-purpose technologies, including artificial intelligence, to inform the Federal Reserve's policy judgments.
5. Inflation Frameworks: Revisit how the Federal Reserve understands and responds to the drivers of inflation.

But the results of those task forces, i.e., their plans to reform the Fed, won't be released until the end of the year.

Meanwhile, Warsh has presided over two meetings of the Federal Open Market Committee, the Fed's interest rate-setting committee, since he took over as chief. And despite elevated inflation and calls for the Fed to raise rates in response, the committee held its target rate steady at both.

Ed Yardeni, an insightful observer of the Fed, the economy, and financial markets, says that Warsh is overly secretive about what his reform plans entail. While the Fed's target inflation rate remains 2% under Warsh, "investors are struggling to understand the what, when, and how of the mission to get there."

So, we'll just have to wait to see if Warsh can deliver on new ways to defeat inflation.

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