00:00Sunal, recent data reinforces the idea that inflation remains a bigger risk for the economy than a weak labor market.
00:07Will this remain a data dependent Fed under Kevin Warsh or was that a feature of the Powell Fed?
00:14OK, so thanks for having me. I'll pick up a little bit on what Subhatra was saying.
00:22And I would just note that a few things. I genuinely think that Kevin Warsh is probably the most hawkish
00:31nominee that we've had for the Fed in the last 20 years.
00:35Let's just look back at it and for a second recognize that we actually have a rather dovish Fed.
00:43If I think about the fact that we're all now looking at the fact that inflation is quite high.
00:49Well, inflation's been high for the last three years. We haven't come down meaningfully below 3 percent.
00:54And the Fed in this period has cut by 200 basis points.
00:58So I think the real piece that I would note is the presumption that Kevin Warsh is going to want
01:08to cut rates is very much a presumption.
01:12Because everything he said about the Fed balance sheet, everything he said about returning the Fed to its more orthodox
01:19roots, actually doesn't scream doubt to me.
01:22I think since the global financial crisis, the Fed has gone to QE almost as a first step towards any
01:31crisis and then has stuck with it for far too long.
01:33I actually welcome the idea of returning to some orthodoxy in terms of monetary policy.
01:39I don't think. Sorry.
01:41No, no. I hear what you're saying. But is that possible in this kind of environment?
01:45I mean, the president has made clear that he picked Kevin Warsh because he wants a certain outcome.
01:51Kevin Warsh might have a history as someone who's been hawkish on the Fed, especially during his last tenure, in
01:56the lead up to the financial crisis and the aftermath.
01:58But can he stay in this job and keep to that hawkish tilt?
02:04Can I ask you something? How can he get out of the job?
02:07He is now in. And the Supreme Court has told us that he's been confirmed.
02:13Much the way that President Trump can't really make Jay Powell leave, he doesn't have the right to do so.
02:20At this point, Kevin Warsh is now our new Fed chairman, and he has a minimum four-year term.
02:30And President Trump actually has, by the time, maybe two and a half years.
02:35So Kevin Warsh is going to have to continue to be a Fed chair with a different president.
02:40And what he has to do is to actually conduct monetary policy.
02:43He is not a nominee who comes out of left field.
02:50He was in the running previously for this role, and a lot of people believe that the reason he lost
02:56to Jay Powell was he was actually too hawkish.
02:59So I would give him the benefit of the doubt, as opposed to what President Trump has been saying, because
03:07he has been saying and he has been pushing and leaning on the Fed.
03:11And the Fed has continued to do what it believes is the correct thing to do.
03:14So I think it's premature.
03:16Let me put this a different way.
03:18Is there anybody that President Trump could have nominated who would not have come in under this assumption that somehow
03:27they were a political appointee?
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