“Federal Reserve chairman Kevin Warsh is attempting a high-wire act: He’s trying to fundamentally rethink the central bank’s approach to guiding the economy, while also using its standard policy toolkit to bring down stubbornly persistent inflation,” Axios reports.
“A market blowup late last month showed the perils of trying both at the same time.”
“The Trump administration this week sparked enthusiasm that the U.S. and Iran could soon strike a deal on the Strait of Hormuz, driving down oil prices and sending stocks soaring — only for no deal to emerge,” CNBC reports.
“If that sounds familiar, it may be because President Donald Trump has claimed dozens of times that the U.S. is close to an agreement that will end the war it began more than five months ago.”
“Investors have reacted to many of those claims with bursts of buying on hopes a breakthrough is near, even as the war instead appears to be widening and progress on Trump’s chief stated goal — containing Iran’s nuclear ambitions — is at a standstill.”
Axios: “Trump has transformed his second term into the most lucrative venture of his entire career, raking in more than $2.2 billion in 2025 from his family crypto empire, legal settlements and various licensing deals.”
”Truth API is the logical endpoint of that profiteering: the presidency’s unrivaled power to move markets, packaged and sold as a subscription.”
“In carrying out their first joint effort in a generation to boost the yen, the U.S. and Japan are seeking to contain tremors that could be triggered by a cratering Japanese currency,” the Wall Street Journal reports.
“The yen’s slide to a 40-year low indirectly threatened to bump up U.S. interest rates and risked throwing a wrench in plans to pull billions of dollars of Japanese investment into the U.S. “
“By propping up first Argentina’s currency and now the yen, President Trump is showing that he’s prepared to help allies who are battling financial markets, a contrast to the hands-off approach long favored by U.S. policymakers except in moments of exceptional peril.”
“A top Federal Reserve official has warned this week’s sell-off in U.S. Treasuries is a signal that the central bank must earn its ‘credibility’ on fighting inflation by backing up its rhetoric with interest rate rises,” the Financial Times reports.
Said St. Louis Fed President Alberto Musalem: “Mr Market spoke this week, and I took a signal from it. The signal emphasized to me that we need to continue to earn our credibility every day with both effective communications and actions as needed.”
“Kevin Warsh is considering reducing the number of regularly scheduled meetings at which the Federal Reserve sets interest rates, a potentially seismic move that would mark the most significant change in how the central bank operates in years,” the New York Times reports.
“The Federal Reserve’s 12-person policy committee meets eight times a year and votes on whether to lift, lower or hold borrowing costs. Mr. Warsh raised the idea of changing the frequency of those meetings at the Fed’s gathering this week.”
Bloomberg: Warsh’s Fed is “upending markets.”
“Treasury yields are hovering at multiyear highs, reflecting worries about rising inflation and the Fed’s willingness to combat it after officials held interest rates unchanged for a seventh month,” the Wall Street Journal reports.
“Federal Reserve officials held interest rates steady Wednesday over the objections of three bank presidents who wanted an increase, underscoring how pressure is building inside the central bank to act on inflation that has run above its target for five years,” the Wall Street Journal reports.
CNBC: Warsh’s plan for a more opaque Fed will get put to the test by markets on edge.
“Ask Kevin Warsh how the Federal Reserve should think about inflation, talk to markets or weigh the impact of artificial intelligence on the economy, and the new chair has a stock answer: There’s a task force for that,” the Washington Post reports.
“Five new task forces, in fact. Roughly two months into his tenure, Warsh has handed panels of outside experts core questions about Fed policy and said little about where he thinks any of it should land.”
Said Warsh: “If we get policy right — and we will, the inflation surge of the last five years will be a thing of the past.”
“President Trump returned to office promising lower costs across the economy, but an important interest rate that his administration cites as a barometer of its success recently hit its highest level of Mr. Trump’s second term,” the New York Times reports.
“The yield on the 10-year Treasury bond, considered one of the most important interest rates in the world, jumped this week to 4.7 percent, up from less than 4 percent before the start of the war in Iran in late February. It was 4.6 percent on the day Mr. Trump returned to the White House in January 2025.”
“The yield underpins borrowing costs across debt markets, from corporate bonds to mortgage loans, and its rise complicates Mr. Trump’s plans to keep costs affordable for companies and households across the United States.”
“The relentless run-up in Treasury yields reflects the globe’s new economic reality: It takes a much richer reward to persuade investors to lend their money, especially for the longer run,” Axios reports.
“Unlike previous bond sell-offs driven by inflation fears, this one reflects a world in which governments and companies are scrambling for enormous amounts of capital to finance wide fiscal deficits, the AI infrastructure buildout and more.”
”The competition is forcing borrowers to pay more.”
“Oil prices are racing back toward $100 this morning after Tehran-backed Houthi militants claimed attacks on two Saudi tankers in the Red Sea, threatening another important route for oil flows and stoking fears that the U.S.-Iran conflict could escalate further,” the Wall Street Journal reports.
“Federal Reserve chairman Kevin Warsh testified before Congress over two days last week, totaling more than five hours. Yet it was comments from several of his colleagues that gave the clearest picture of what the central bank is likely to do at next week’s policy meeting,” Axios reports.
“It is a central paradox of Warsh’s communications strategy. He is determined to get out of the business of giving markets and the public much guidance on future policy, which means the markets fill in the gaps based on comments from other officials.”
“That isn’t necessarily a bad thing — it preserves flexibility on interest rate policy that was diminished when former Fed chiefs all but preannounced upcoming rate moves.”
“There is an adage in the financial world: The stock market is not the economy,” the New York Times reports.
“Except that, right now, maybe it is.”
“Major stock indexes have set record after record in recent years, fueled by seemingly boundless appetite among investors for anything connected to artificial intelligence. The total value of the U.S. stock market has more than doubled over the past decade to over $75 trillion, roughly two and a half times the annual output of the entire U.S. economy, itself a record ratio.”
“Much of that value exists only on paper, bets on future profits that may or may not materialize in the years ahead. But the boom is supporting real economic activity today, pumping trillions of dollars of investment into semiconductor factories, data centers, power plants and transmission lines. And the wealth it is creating is helping to drive consumer spending, particularly among affluent Americans, whose appreciating stock portfolios make them more willing to shell out for luxury vacations, pricey electronics and meals at high-end restaurants.”
Annie Lowrey: “No less an authority than Sam Altman is arguing that we are in an AI bubble. The International Monetary Fund is citing it as a significant risk to financial stability and warning about what might happen when it bursts: diminished investment, tighter credit, reduced consumption, disrupted trade flows.”
“That’s pretty much what happens when any bubble pops, as a Dutch tulip obsessive could have told you in 1637 or a bitcoin evangelist could have told you in 2011, 2013, 2014, 2018, or 2022. Yet the AI bubble is no ordinary bubble. Hyper-rich corporations are stoking it, rather than kitchen-table investors. They’re blowing it up when credit is fairly expensive, not dirt cheap. That might make the bubble less fragile and longer lasting than those of the past. But it won’t make it any less painful when it pops.”
“Three months into the Iran war, bond market traders are tuning out President Trump’s posts on his personal social media site, Truth Social, analysts say,” Axios reports.
“Researchers from JPMorgan show that for the most part, his social media posts are noise, with very little ability to move the market.”
“JPMorgan Chase CEO Jamie Dimon said investors are underestimating the risks facing the global economy and that he wouldn’t buy either equities or long-dated U.S. Treasurys at their current prices,” CNBC reports.
Politico: “As investors hunt for the Trump administration’s next winner, they’re increasingly trying to anticipate which industries and companies will benefit from White House policy — from tariffs and export controls to procurement, subsidies and even presidential attention itself.”
“That has changed how investors think about risk. Beyond earnings and cash flow, they’re weighing which CEOs have the White House’s ear, whether a presidential announcement could transform a company’s prospects overnight, or whether a public falling-out could wipe out billions in market value.”
Taegan Goddard is the founder of Political Wire, one of the earliest and most influential political web sites. He also runs Political Job Hunt, Electoral Vote Map and the Political Dictionary.
Goddard spent more than a decade as managing director and chief operating officer of a prominent investment firm in New York City. Previously, he was a policy adviser to a U.S. Senator and Governor.
Goddard is also co-author of You Won - Now What? (Scribner, 1998), a political management book hailed by prominent journalists and politicians from both parties. In addition, Goddard's essays on politics and public policy have appeared in dozens of newspapers across the country.
Goddard earned degrees from Vassar College and Harvard University. He lives in New York with his wife and three sons.
Goddard is the owner of Goddard Media LLC.