Fed Watch – 4/24/2026

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 welcome to this April 24th edition of ITR Economics Fed Watch.

Pretty interesting week on the data front. We’ll start with retail sales, which did beat expectations came in on a headline basis of 1.7% for March. Now, March was the first snapshot of how this retail spending component looks post Iran conflict. Clearly, a lot of that rise was due in fact to higher gas prices. Gas was up 15.5%. However, even once we strip out gasoline and that additional spending at the pump, the consumer is showing a lot of resiliency and we actually did see strength elsewhere. So despite that increased cost of energy and the increased charge to fill up your tank, the consumer is still out there spending.

A few of the headline categories that we saw in March were actually some things that have been down in recent months, things like furniture, building materials, where we’ve seen a little bit of malaise in the overall housing market kind of flow through to those subsequent purchases. Those both performed relatively well in March. We also saw the electronics and computer segment that performed relatively well. Some other categories that are just hanging in there, food and beverage, personal care, strong, but not blowing it out of the water. Otherwise, the service component, especially eating out at restaurants, food service, and drinking places, that was basically flat in the month. So good news here is it doesn’t seem like a lot of that increased gasoline and energy spending is necessarily coming out of other segments of our budget. At least thus far, we’re weathering those higher gas prices, looking for the end of them very clearly. And I’d point you to our ITR oil price forecast if you do want a better view on just how long we expect these relatively high prices to last. But right now, our consumer is still out there. They are still spending, they haven’t totally abandoned the rest of the economy. We are keeping our retail sales forecast in place. So if that is of key interest to you, again, please check the forecast, check in with your economist. You can find a full write up on our Trends Report that has come out just recently.

If you are looking, though, at this increased, let’s call it tension, between things like pricing and overall volume sales, that’s where we’re finding just some different undercurrents flowing through the economy today. I do want to start to call your attention to a webinar that we will be providing in June. The dates are June 17th for the live version and June 25th is the rebroadcast with a new live Q&A. My colleagues, Grace and Connor, will be leading this discussion really on where you should focus. If you’re looking for state by state opportunities, a lot is going to come out in this webinar, a lot of new research currently going into it. So this will be your first look, especially at the US consumer, which as we’ve said in the past, contributes about two thirds of gross domestic product. This is a really critical thing to know about our economy. So which states are relative winners, relative outperformers. If you need any geographic help with finding opportunities, this webinar is going to provide that.

But back to the Fed a little bit more directly this time. Last week we talked about the political tension with Chair Powell when he’ll step down, how he’ll step down, if he is going to maybe wait out say that Justice Department probe. So this week we did see Warsh, his nominated successor, in confirmation hearings with the Senate Banking Committee. Now the actual tenor of the hearings in many ways have less to do with Warsh himself as a candidate for this position, and more to do with the political moment in which the Fed finds itself. For example, Thom Tillis, he’s a Republican from North Carolina, has actually said he will block confirmation until the Justice Department drops its investigation of the Fed and their cost overruns and Powell specifically. So this is clearly a pressure point, he doesn’t seem to have too much against Warsh as a leader of the Fed, but using that holdup in the committee as a pressure point to get this hopefully resolved at some point.

If we look at Warsh as an individual and his views on the central bank, again he has a long history here, his history is actually much more hawkish. He has in the past, and we’re looking at kind of great recession timeframe here, really shown a hesitance for too many interest rate cuts to let inflation get out of control. Now however, he is talking about favoring generally lower interest rates. A lot of his reasoning here comes down to things like AI, he cites that as a reason that GDP potential growth can be higher than it was previously, so there’s a new balance of factors. This perceived change though in position has opened him up to a lot of criticism, especially from the Democratic side of the aisle, that he’s just taking direction from Trump. He’s telling President Trump he will do what the president wants with interest rate policy. Clearly Warsh himself has not said that, he does have very academic reasons for these beliefs, but that increased political tension is something that we’re going to be watching with the Fed really for the foreseeable future. Now keep in mind he’s only one vote of 12 voting members, even if he does become the chair, but it’s important to see that messaging from the top. Warsh has also said a lot about that the Fed should essentially take a smaller role, get back to their roots, stick more to their dual mandate, and less in these broader categories in which the Fed has been opining.

Again we’ll be following these confirmation hearings and the entire process to see what that timeline looks like. We’re entering May here very shortly, the technical term at which Powell’s chairmanship will expire. He can again stay on in the interim, he has committed to providing a smooth relationship waiting for the final confirmation of his successor. We don’t know if he’ll stay in his voting role beyond that. Again something to be watching closely as we get closer into this May timeframe. We hope you’ll be right here with us as we do so please join us again next week on Fed Watch.