Understanding Kevin Warsh's Plan for the Fed

The podcast "Trumponomics" examines the potential impact of Kevin Warsh's appointment as the next chairman of the Federal Reserve. Krishna Guha, head of economics and central bank strategy at Evercore ISI, discusses the market's initial hawkish reaction to Warsh, anticipating higher rates and a stronger dollar, while also noting uncertainties about Warsh's true policy leanings. Guha addresses Warsh's past concerns about inflation and how his views may have evolved due to the impact of AI on productivity. The conversation explores Warsh's desire for a smaller Fed balance sheet and potential strategies, including banking deregulation, to achieve this without stressing money markets. Ultimately, the discussion weighs the challenges Warsh faces in gaining internal support at the Fed and coordinating monetary policy with fiscal policy.