David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, stated that Kevin Warsh is likely to vote to keep interest rates unchanged during his first meeting as Federal Reserve Chair next month. Despite repeated calls from U.S. President Donald Trump for rate cuts, Warsh is expected to focus on building consensus with his new colleagues.
Warsh will be sworn in as Fed Chair at the White House on Friday in a ceremony presided over by President Trump. He assumes leadership of the central bank at a challenging time for policymakers, as tensions in Iran have increased inflationary pressures. However, Trump has previously expressed his expectation for Warsh to push for monetary easing in the short term and has consistently pressured former Chair Jerome Powell, criticizing him for not lowering borrowing costs quickly enough.
"We still have to see how Kevin Warsh handles this, because he clearly gave the president the impression that he might be willing to cut rates," Kelly said on Wednesday. He added, "But I don't actually think he will do that; he just gave Trump that impression. So the question is, how does he balance that now."
The U.S. Senate confirmed Warsh as Fed Chair earlier this month by a vote of 54 to 45, the narrowest margin for any Fed Chair nomination in history. Warsh pledged to senators that he would maintain independence while also offering sharp criticism of the Fed's recent performance. Furthermore, Warsh was known for his "hawkish" monetary policy stance during his tenure as a Fed Governor from 2006 to 2011.
"Overall, most members of the Federal Open Market Committee will choose to proceed cautiously, aiming to navigate through 2026 first and then observe how the situation in the Gulf ultimately evolves, along with the trajectory of the economy and inflation," Kelly stated.
The Fed's next interest rate decision is scheduled for announcement on June 17. Traders currently expect policymakers to hold rates steady within the current range of 3.50% to 3.75%. Kelly predicts that the vote is likely to be unanimous.
"It will probably be 12 to 0," he said, adding, "One of the responsibilities of the Fed Chair is to strive for consensus within the Committee. If you start off by disagreeing with all your colleagues on a rate cut, it will be very difficult to build or maintain that consensus in the coming years."
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