“I like the fact that he believes in narrowing the mission of the Fed back closer to what it was, which is inflation and growth."
Prior to his confirmation as Fed Chair this week, the confirmation hearings for Kevin Warsh generated the predictable volume of political noise: alignment accusations, independence pledges, the usual theater. Linneman's read cuts past all of it. That a president nominates someone with broadly compatible views is unremarkable by definition. The question worth asking is not whether Warsh will be independent. It is what he will do with the institution once he is running it.
On that question, Linneman came away from the testimony with three specific signals. Warsh endorsed dissent within the Fed, a correction to a long-running problem: twenty years without a dissenting governor's vote does not pass a smell test when the decisions being made are genuinely difficult. Warsh also expressed skepticism about the dot plot, which Linneman treats as government-introduced noise, in part because it has no history of accurately predicting rates. Asking Fed members to publish rate forecasts generates less quality information than the speeches they were already giving, and markets have spent years pricing off a signal that was never as clean as it looked.
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