Fed Watch – 1/30/2026
Rates Hold as Trump Names New Fed Chair Pick
This week on Fed Watch, ITR Economist and Speaker Lauren Saidel-Baker breaks down a busy week for the Federal Reserve, from the FOMC’s decision to hold interest rates to the surprise announcement of Kevin Warsh as President Trump’s pick for Fed Chair. With markets already uneasy about inflation and the timing of the next rate move, leadership changes at the Fed raise important questions for businesses planning around borrowing costs, capital investment, and economic uncertainty. Get insight into what Warsh’s policy stance could signal for rate cuts, Fed credibility, and the path forward. What should decision-makers be watching most closely right now?
FOLLOW US
Key Episode Takeaways
- 00:18 – FOMC holds rates and why two dissents matter
- 01:12 – Trump announces Kevin Warsh as Fed Chair pick
- 02:05 – Warsh’s track record during the financial crisis
- 02:55 – Hawkish vs. dovish signals and market credibility
- 03:48 – What Fed leadership changes mean for future rate moves
The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.
Hi, I’m Lauren Saidel-Baker, and thank you so much for joining me for this January 30th edition of Fed Watch. Well, it’s been a big week in Fed headlines. First, for some scheduled reasons, we did have the January meeting of the FOMC earlier this week as largely expected. They held rates. There were in fact two dissents this time around. Both Myron and Waller argued that there should have been a quarter point cut at this meeting, but the committee overall did vote to hold rates study. There might be some rumblings that those dissents were one last push, one last audition, if you will, for the Fed chairmanship. Seems like it wasn’t enough, didn’t work.
Trump announced his pick today, and that is Kevin Warsh. Now, in Fed circles, this is something of a known name. He’s experienced in Fed world. He actually was a Fed governor back during the financial crisis. It’s interesting to note, he was on the short list for Fed chair when Powell was chosen in that post Janet Yellen cycle, but ultimately Trump did pick Powell that time around. So now here we are back to Warsh. As I mentioned, a governor during the financial crisis, and he has a lot of Wall Street experience and credibility. So at that time, he was very close to Ben Bernanke. He was something of a bridge or a liaison to Wall Street as they managed through that crisis. So he’s a known quantity in the market. He has credibility. At the time back in 2008, he was markedly more hawkish. He made these arguments that quantitative easing and the scale of quantitative easing the Fed was doing back then really had important inflation implications that they shouldn’t be going quite that heavy-handed because of the risks down the line. In more recent years though, his rhetoric has shifted more dovish. He’s put out a lot of thought pieces that do tend to align slightly more with the dovish camp that arguing for future, excuse me, for ongoing rate cuts. Also arguing that tariffs are not necessarily the inflationary push that we really should see limit the amount of rate cuts.
That’s something that President Trump really likes to hear. So a shift slightly more dovish, but this is generally a moderate candidate. This is someone who’s fairly centrist. And as I’ve said before, has good credibility in the marketplace. With the questions of the Fed as an institution right now coming to the forefront, that’s very, very important in this role going forward. It’s currently unclear if Powell will stay on. His term as Fed chair does end in May, but his term on the FOMC actually is a bit longer. He’s not fully committed to staying on or leaving as most prior Fed chairs do when their chairmanship ends. There are always questions of a shadow chair if you do have that former chair individual still on the committee, but we’ll see what he chooses to do. And if President Trump does in fact have another seat, another vacancy to fill with one of his picks.
So that brings us overall back to what this means for Fed policy going forward. At the margin, it is a slight shift more dovish, but keep in mind, even if you are the chair, you’re still only one vote when it comes to setting interest rate policy.
So there will be more messaging certainly to come from this new chair. He still does have to clear his Senate confirmation, but we’ll be watching very closely what comes out in those confirmation hearings as we move through the process. And we hear a little bit more about his thinking and about his expectations for a path to rates going forward. The Feds in a very interesting position right now. We’ve talked so much in recent episodes about that balance of their dual mandate, about the inflation side on the one hand, which we’re starting to get more and more worried about that the market might even be getting a little bit more worried about. We’re starting to hear other economists say that the next rate move is more likely to be a move up rather than a move down. Now, given where things stand between inflation and the other side of the dual mandate, that is the labor side of things. That is not the overwhelming market consensus. In fact, market odds are still on for a June cut to be the next move. We’ll see as additional data comes out as we get closer to that date. But until then, we’ll be watching the political side of things. We’ll be watching those confirmation hearings and we’ll be watching additional messaging coming out from these individuals. I hope you’ll stay here with us and watch it right here on Fed Watch.
