LARRY KUDLOW: Kevin Warsh’s message to the markets – good news can be good news again
FOX Business host Larry Kudlow discusses his take on Fed Chairman Kevin Warsh on stage on ‘Kudlow.’
The press conference of Kevin Warsh’s first trip as the new chairman of the Fed was very effective. He was knowledgeable, clear, informative, humble. By the way, so was the Fed’s press release. It’s short and sweet. My two biggest takeaways were the first: the central bank’s current emphasis on price stability. Their statement emphasized strong productivity and business investment, as well as job gains and low unemployment.
By the way, production and business investment on the supply side will be a sign of Mr. Wars. However, inflation is the target now. As Mr. Warsh put it: “We note that inflation has been running well ahead of the Fed’s stated long-term inflation goal of 2 percent. That has been going on for more than five years. Persistently high rates are a burden on the American people.” Mr. Warsh concluded by saying: “this committee will bring price stability”
Of course if there is a deal with Iran and the Strait of Hormuz is reopened, that will lower inflation significantly. Already the West Texas Intermediate price has fallen 30 percent to about $76 a barrel. Fuel prices will follow soon.
It is not impossible that the CPIs for July, August, and September will be negative, which certainly changes the overall picture of inflation into deflation, which may change the overall picture of the interest rate from rising levels to falling levels. However, Mr.
My second big move was the new chairman doesn’t believe in the Phillips curve theory that growth causes inflation. This is very important, because among other reasons there is continuous business growth and the stock market, and productivity, and the AI revolution, all in response to low taxes, simple regulations, and drill, baby, drill.
FOX Business White House Correspondent Edward Lawrence reports on the Federal Reserve’s decision to keep interest rates current in ‘Making Money.’
Here is Mr. Warsh about inflation and low unemployment at the same time: “I don’t share the idea that was expressed a few generations ago, that the chairman of the Federal Reserve showed up on a stage like this and said, you have to choose, and you will have to decide if you are willing to tolerate high inflation in order to put more people to work. Mr. Warsh added that “What I believe is that if we do our job, we can have strong growth, low prices and consistent strong employment”
Regarding further reforms of the Fed, Mr. Warsh is establishing five task forces with people inside and outside the Fed on communications, balance sheets, data sources, productivity and operations, and the inflation framework. This is a smart move, a collaborative move, but it also shows that changes are coming. One key point that I really like was the mini-riff of Mr. Warsh on how markets should be able to react directly to incoming data, not the forward-looking views of the Federal Reserve.
Indeed, Mr. Warsh did not put his dot on the Fed’s forecast. It’s very cool. But he also talked about how he needs improved data collection in our fast-changing high-tech economy. Perhaps you mean that good economic news should be just good news, not bad news because a number of Federal Reserve bank presidents have a certain idea that a prosperous America is somehow a bad thing, especially, waiting … under President Trump.
Speaking of good news, today’s retail sales report was a hit, exceeding all expectations. So what happened? People started selling stocks because they were worried about the Fed raising interest rates. Let’s hope Mr. Warsh puts an end to all that nonsense.
