Warsh is in, but many questions remain in the US
Warsh’s arrival sharpens Fed uncertainty as inflation pressures and fragile consumer demand delay rate cuts
The Mideast conflict remains the economy’s wildcard, with oil-induced inflation complicating the Fed’s calculus — pushing near-term prices higher while squeezing consumer purchasing power in ways that could slow growth.
The result is a policy standoff, raising the odds that a rate cut will be delayed until the second half of the year.
The incoming Fed chair Kevin Warsh cleared a major hurdle as the Justice Department dropped its probe of Powell, but his likely confirmation hardly settles the bigger question of which way he’ll lean on rates. His Senate testimony offered few clues — he acknowledged full employment, criticized past policy missteps, and declined to tip his hand on cuts.
On the consumer front, March retail sales delivered a headline-grabbing jump, but the story beneath the numbers is less encouraging. Tax refunds, not organic income growth, fueled the spending surge, and lower-income households — the quickest to spend — will soon exhaust that windfall.
With gas station sales claiming an ever-larger slice of the household budget, a spending pullback looms, one that could ultimately give the Fed the cover it needs to cut — but only after more pain filters through and recession risks overcome inflation risks.
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