A sphinx at the Fed
Kevin Warsh, nominated by Donald Trump as the next chair of the U.S. central bank, has made his “manifesto” public. It is a strategy that concerns the objectives and instruments of monetary policy, as well as relations with the government. The overall picture that emerges is one of “ambiguous normalization.” On the one hand, Warsh promises to bring monetary policy back within more traditional boundaries, limiting its scope of action and scaling back the Fed’s role; on the other, he hints at openings that could accommodate the needs of the White House. In short, the risk is that a sphinx will be guiding the American central bank: a hawk in words, but perhaps a dove in deeds. And that this ambiguity will further increase global macroeconomic uncertainty. Without anyone feeling the need for it.
