MW New Fed chair Warsh will have a fight on his hands if he pushes for interest-rate cuts

By Greg Robb

Statements from three officials show inflation fears are giving them cold feet about any more rate cuts

Kevin Warsh, President Donald Trump's nominee for Federal Reserve Chair, departs after his testimony before the Senate last week.

Three dissenters from the Federal Reserve's meeting this week made clear in statements on Friday that they are growing more concerned about the outlook for inflation, suggesting that incoming Fed chair Kevin Warsh will have a struggle if he pushes for quick interest rate cuts.

In speeches over the past year, Warsh has indicated he's interested in cutting rates, which President Donald Trump has been pressuring the central bank to do since he won re-election. But persistently high inflation and the prospect that the trend could stick around for months due to the war in Iran have made the prospect of cuts less palatable to some on the Fed's board.

Following this week's meeting, Fed-watchers were quick to note that Wednesday's decision was the most divisive at the central bank in decades. There were actually four dissents, with Fed governor Stephen Miran wanting a rate cut. Miran, a former Trump White House economist, has dissented at every meeting since he joined the Fed last September. His brief term at the Fed will end when Warsh is confirmed by the Senate.

Investors focused more on the three dissents against the lean toward easing. They see the dissents as less of a slight to outgoing Fed Chair Jerome Powell and more of a warning to Warsh about trying to cut immediately.

"Any push for rate cuts will likely face fierce opposition," Lindsey Piegza, chief economist at Stifel, said in a note to clients.

Three of the dissenters - Neel Kashkari from Minneapolis, Beth Hammack from Cleveland and Lorie Logan from Dallas - each released statements Friday explaining their decision to oppose the Fed's policy statement earlier in the week.

While all three said they supported the Fed's decision to make no change to interest rates, they opposed language in the statement that implied that holding steady this month was simply a pause and further cuts were likely in the coming months.

The three officials wanted new wording that would signal to the market that the next interest move could be up or down, depending on how the economy evolves.

Inflation remains persistent, some dissenters said

Kashkari said he dissented because of the uncertain path of the war with Iran and the effects on domestic inflation, employment and economic growth.

There was a plausible scenario that an extended closure of the Strait of Hormuz would send a "price shock wave" that is larger than currently expected, he said. In this case, it was possible that "a series" of rate hikes could be needed, even at the risk of further weakness in the labor market, to make sure the public didn't think that inflation was running out of control, Kashkari added.

In her statement, Hammack of the Cleveland Fed said that the U.S. economy looked resilient so far this year and the unemployment rate looked stable.

At the same time, "inflation pressures continue to be broad based" even before accounting for rising oil prices, she said.

Logan of the Dallas Fed said she was "increasingly concerned about how long it will take inflation to return all the way to the Fed's 2% target."

Inflation on the Fed's key gauges is well above 3% and is set to rise further.

At the same time, the artificial-intelligence boom has kept financial markets buoyant. Job growth has been held down by falling labor supply, resulting from declining immigration.

"In that context, it makes sense that many Fed officials are getting cold feet about cuts" and want more flexible language, said Skanda Amarnath, executive director of Employ America.

"The facts are simply not on the side of those eager to bank the table for an imminent cut," he said in an email.

Top White House economist Kevin Hassett said in a speech to the Investment Company Institute Leadership Conference that the dissents were another example of a "partisan Fed."

"Kevin Warsh is going to fix it," he added.

Economists said it was important to remember the dissenters were in the minority. Powell and the majority of the Fed's interest-rate committee didn't favor changing the guidance.

"I really didn't think we needed to do it this meeting," Powell said of changing the guidance at his press conference after the meeting. "We have so much to learn and there's so much uncertainty about the path ahead, there doesn't need to be any rush to make that decision now."

Michael Feroli, chief economist at J.P. Morgan, said that the decision not to change the language could be seen as a sign of respect for Warsh, allowing him to craft his own statement.

"The Fed is not considering hikes and it's about to be led by someone even less likely to go there," Kurt Lewis, head of central bank policy at Piper Sandler, said in a note to clients.

Stephen Stanley, chief U.S. economist at Santander, said he thought Warsh was already planning to make a fresh start with a new statement at the Fed's next meeting in June.

-Greg Robb

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May 01, 2026 13:56 ET (17:56 GMT)

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