The New Fed
Kevin Warsh Wants A Steeper Yield Curve
The new Fed chair is shifting power from central-bank speeches to market forces. Kevin Warsh’s Fed is deliberately abandoning the old playbook of cuddling up to markets with press conferences and forward guidance. Instead, it likely wants a steeper yield curve and more bond volatility to do much of the tightening work, while keeping short-term rates anchored via ample repo liquidity.
The post-FOMC headlines were negative. Of course, the media were never going to warmly welcome a Fed chair who de-emphasises press briefings and threatens to eliminate them altogether. Yet much of this criticism is simply nostalgia for the old communications regime and misses the real problem that the US economy is too hot (NGDP growth far exceeds current bond yields), and the Fed’s new strategy may fail against its yield-insensitive spending drivers (AI, fiscal). Worse, Japan’s quiet Yen intervention could indirectly trigger a bigger Treasury sell-off. Overall, US Treasury yields look 100–200 basis points too low. A realignment could eventually hammer stocks, even if Wall Street benefits from the near-term rate pause.
