Kevin Warsh showed that he’s decisively not Trump’s ‘sock puppet’—and markets didn’t like it

Before Kevin Warsh stepped up to the podium Wednesday afternoon, no one really knew which one would show up: the hawk or the “sock puppet.” There was the young, spry and hawkish Warsh of 2011, a Fed governor who quit following the financial crisis out of protest over the Fed’s bond-buying. But in recent months, as Warsh became favored to take over former Fed chair Jerome Powell’s place, the 56-year-old took on a more dovish coloring: arguing AI was disinflationary, that growth was not to be feared and the economy could perhaps sustain some lower rates. At his confirmation hearing, he criticized Jerome Powell’s Fed, saying the rate hikes of 2021-2022 had contributed to the worst inflation in 45 years. Warsh’s confirmation ended up being the most politically divided in recent history; Sen. Elizabeth Warren accused him of acting as Trump’s “sock puppet.” But even as Warsh only laughed off those complaints, there was no real way for anyone to know who would actually show up at the new Fed chair’s first press conference—until 2 p.m. on Wednesday, when the Federal Reserve released its policy statement. It was a bit glib, but definitive: “We will meet our price stability objective,” Warsh wrote, then repeated again and again at his press conference. Inflation has been running at roughly twice the Fed’s 2% target for five years. Warsh called that unacceptable and kept saying so. “The ‘two’ is the left of the decimal point,” he told reporters. “For now, ‘zero’ is to the right.” To Jon Hilsenrath, the veteran former Wall Street Journal reporter long known as the “Fed whisperer,” that settled it. When Warsh repeated the price-stability line, and when the committee wrote it into the statement, Hilsenrath said, “that was hawkish Kevin talking.” Markets agreed, and threw a little fit over it. The Fed held its benchmark rate at 3.%-3.75%, as expected, but n