May 25, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Adobe Podcast.

Taylor St. Germain:

Thanks so much for joining us on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence, and today we have a special guest—my colleague Lauren. You probably recognize her from our Fed Watch series, and I wanted to talk about the Fed and inflation today, so I figured there was no better person to have on than Lauren. We appreciate you joining us.

Lauren Saidel-Baker:

Thanks, Taylor. So glad to be here.

Taylor:

I figured we’d start with a fundamental question. Everyone knows we have a new Fed chair, and as we think about a Fed run under Kevin Warsh versus Jerome Powell, what are some of the key differences? How are you interpreting it? Does it matter? Give us a little background

Lauren:

Warsh has clearly come in with more of a dovish bent. I think you can see that in a lot of the discussion surrounding his confirmation. At this point, though, I think his hands are largely tied, and he’s going to have to walk a tightrope much like Jerome Powell did between the economic realities and the pressure to see more rate cuts.

What’s interesting is that when Warsh was previously a member of the Fed during the Great Financial Crisis, he was actually very hawkish. So he’s definitely had a change of heart. He attributes a lot of that shift to AI and technological innovation. He’s argued that AI and advances in technology have changed the potential long-run growth rate for GDP, meaning rates may not need to stay as high as they otherwise would. That said, he’s still in a difficult position because of where inflation currently stands. No one on the committee wants inflation to get out of hand. And whether he cuts or doesn’t cut, at the end of the day he’s only one vote on that committee. He’s still going to have a difficult path forward in building consensus around future rate policy.

Taylor:

Lauren, can you give people some perspective on how voting at the Fed actually works? You mentioned he’s just one vote, and I think that’s important because a lot of people assume everything changes fundamentally because of one individual. But that’s not really how the Fed operates, right?

Lauren:

Not at all. The Fed chair is only one vote on the committee, and these governors serve very long terms—fourteen years in many cases. There are different groups involved in voting: the core Fed governors as well as the presidents of the regional Federal Reserve banks. The regional bank presidents rotate voting privileges over a multi-year cycle. So, for example, the president of the Boston Fed might vote one year, while another regional president rotates in the next year. Importantly, those regional presidents are not nominated by the president of the United States. They’re selected by the governing bodies of their regional banks. So there are a lot of different moving pieces that come together to form the FOMC voting committee. At the end of the day, the Fed chair can influence signaling and communication strategy. Warsh has made a lot of comments about how he believes Fed communication should evolve. But he cannot simply decide unilaterally that rates will move a certain amount. There are a few other dovish voices on the committee. Myron, for example, who was also nominated by President Trump, has been notably dovish in both the dot plot and some of his dissents. But beyond those few voices, most of the committee has become increasingly vocal about concerns surrounding inflation and the need to either hold rates steady or potentially raise them further.

Taylor:

I think that’s important when we look at the latest inflation report. Earlier this year, when CPI was between 2% and 3%, there was room for debate. The Fed likes a 2% target, but some people argued that we were “close enough.” But the most recent inflation report showed a significant jump. My takeaway has been that even the more dovish members of the Fed are going to have a hard time ignoring inflation numbers like these. How are you viewing the path forward?

Lauren:

Absolutely—and it’s not just CPI. The latest PPI numbers came in hot as well, with headline producer inflation around 6%, which is a significant figure. What’s especially notable is how broad-based the inflationary environment is. It’s not just oil prices. It’s not just tariffs. Inflation pressures are showing up in both goods and services. And it wasn’t only April. February and March were also running hotter than what we’d normally expect seasonally. So I don’t think this is a one-and-done situation, and I don’t think we can ignore these trends. At ITR, we’ve been talking about this for quite some time. These inflationary drivers are broad and pervasive. It’s never just one factor. We’ve been warning about commodity prices, wage pressures, money supply growth, the velocity of money, Treasury issuance—you name it. There are very broad reasons why pricing pressure is moving higher rather than lower. I think it’s wishful thinking to focus solely on how quickly the Fed can begin cutting rates again. That’s probably the wrong question right now.

Taylor:

For everyone watching, we’ve been talking about this “profitless prosperity” concept for the last year. Lauren’s exactly right—it’s not just commodities. It’s electricity prices, labor costs, money supply trends, and a whole range of indicators we track at ITR that point toward persistent inflation that’s higher than what we’d consider comfortable. One additional challenge for the Fed is messaging. At ITR, we like to say we’ll tell you the truth, while the Fed often tells you what they want markets to hear. When you look at the dot plot, it suggests rates stay relatively flat over the next several years. But I think we’d disagree with that. Last I checked, we’re a bit more concerned about higher rates moving forward.

Lauren:

Personally, I do disagree with the current dot plot outlook. One thing I’m watching closely is the increasing spread between the dots themselves, which signals growing disagreement within the committee.

The Fed needs to preserve both its credibility and its independence, but the signal from the dot plot isn’t especially reassuring right now. That’s why at ITR we tend to take more cues from the bond market, because bond yields reflect what investors truly believe. You see it directly in borrowing costs and Treasury yields. I’ve been saying for a few months now that I would not be surprised if the next move in rates is actually upward rather than downward. And I think the bond market is beginning to align with that perspective as well.

Taylor:

And for those paying attention, the bond market was definitely signaling inflation concerns this week when we saw yields rise. We may all be economists, but I don’t know if anyone is smarter than the bond market. It’s one of the key indicators we watch closely at ITR.

So when I step back and look at all of this, our message to businesses has been consistent: if you need to borrow money or invest in your business, you should think about doing it sooner rather than later.

There’s still a widespread assumption that lower interest rates are coming in the next year or two, but I think both of us would say that’s increasingly unlikely. Businesses need to think not only about interest rates, but also about the broader economic environment as we move toward 2030.

Any additional takeaways for businesses?

Lauren:

I think that’s exactly right. 2030 is approaching very quickly.

If you’re planning to borrow money for any major initiative before 2030, that’s the first question you should be asking yourself now. For more than a year, we’ve been saying that while we may see small cuts here and there—and we have seen a few modest moves lower—the real question is whether a 25-basis-point change actually makes or breaks your investment decision. If waiting for slightly lower rates costs you six months or a year in implementation time, that delay may matter far more than the rate difference itself. Businesses need enough runway not only to make the investment, but also to realize returns from it before we move past the cycle peak and begin slowing down. That’s the timeframe businesses should really be thinking about.

Taylor:
Absolutely. We’ll save the housing market discussion for another podcast—I know that topic is top of mind for a lot of people as well.

For now, we hope you found this conversation helpful. Connect with Lauren and me on LinkedIn—we’re both pretty active there, and we always appreciate hearing your thoughts and feedback.

You can also head over to our website and LinkedIn page to hear more from Lauren on Fed Watch each week. This is the world she lives in—whether she likes it or not—and we really appreciate the insight she provides. Lauren, thanks again for being here.

Lauren:
Thanks for having me on, Taylor.

Taylor:
And as always, please like and subscribe to TrendsTalk wherever you listen to podcasts. We look forward to seeing you next week. Thanks so much, everyone. Take care for now.