The world will be watching when new Federal Reserve chair Kevin Warsh announces the central bank's interest rate decision Wednesday afternoon. But financial experts say it will be less about what he says, and more about how he says it.
The goal of the Federal Reserve is two-fold: Maintain a healthy job market and keep inflation around 2%. With inflation rising recently, economists largely expect the Federal Reserve to keep interest rates unchanged after this meeting.
“This is a difficult environment. We've had tariffs, we have rising inflation, we have a conflict that may be ending in the Middle East, but altogether there's a lot of headwinds for the economy,” explained Stephen Kates, a financial analyst with Bankrate.
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The chairman is responsible for delivering that message, and experts will be watching Warsh’s demeanor.
“If he can conduct himself and project calm confidence up there at the podium and answer questions succinctly and without appearing to dodge any answers, you know that's going to send a good message to the markets,” Kates said. “What questions will he answer? Which ones will he not answer? And how is he going to set the table for the rest of the year?”
President Donald Trump has been publicly pushing the Fed to cut interest rates for months, and at the beginning of the year, rate cuts were expected. But with energy costs pushing inflation up, now rate cuts seem to be off the table, and we could see the Fed increase interest rates later this year.
“Trying to slow the economy is one of the ways that the Fed can try to fight inflation, to make borrowing rates higher, to make lending tougher, that can slow down the economy, and that is one of the ways that we can fight inflation,” Kates said.
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Stock markets are in positive territory and oil prices are starting to fall with news of a potential peace deal between the U.S. and Iran. But that agreement is unlikely to impact the Fed’s decision this week. The Fed relies on hard data and numbers, and any trackable impact from a possible peace deal is months away.
