The next Fed chair
The podcast discusses Kevin Warsh's nomination as Fed chair, analyzing his dual monetary policy views and the market's neutral reaction. The hosts explore Warsh's history of Fed criticism, his productivity-focused economic theories, and concerns about potential changes to Fed independence under Trump.
Summary
The hosts begin by acknowledging their incorrect prediction that Scott Besant would become Fed chair, as Kevin Warsh was nominated instead. They note that markets reacted neutrally to Warsh's nomination - neither weakening rates nor the dollar, which they interpret as cautious approval compared to the alternative candidate Kevin Hassett. Warsh presents an interesting contradiction in monetary policy views: he recently advocated for lower interest rates while simultaneously maintaining his long-held position that the Fed's balance sheet should shrink significantly. The hosts discuss criticism that Warsh has been politically motivated in his monetary policy stances, appearing tougher on monetary policy under Democratic presidents. However, they argue that once in the actual Fed chair role, Warsh will face entirely different incentives and pressures than he has as an outside critic for 15 years. They examine Warsh's belief that AI will drive productivity gains similar to the internet boom of the 1990s, potentially allowing for looser monetary policy without inflation. The conversation also covers Warsh's views on shrinking the Fed's balance sheet more aggressively, which could remove cash from the financial system at a time when massive fiscal deficits require significant bond purchases. The hosts express concern about Warsh's comments regarding increased Fed-Treasury cooperation and his general silence on defending Fed independence from Trump's attacks, viewing this as potentially problematic for central bank autonomy.
About this episode
<p>President Donald Trump announced his pick for the next Fed chair at the end of last week. It was Kevin Warsh, a former member of the Fed Board of Governors. Today on the show, Katie Martin and Rob Armstrong dissect Warsh’s previous statements and try to figure out how being in charge will change his outlook. Also they go long theme parks and short grindcore. </p><br /><p>Take the FT’s anonymous annual bonus survey <a href="https://www.feedback.ft.com/c/r/2026FTBonus" rel="noopener noreferrer" target="_blank">here</a>. </p><br /><p>For a free 30-day trial to the Unhedged newsletter go to: <a href="https://www.ft.com/unhedgedoffer" rel="noopener noreferrer" target="_blank">https://www.ft.com/unhedgedoffer</a>.</p><br /><p>You can email Robert Armstrong and Katie Martin at <a href="mailto:[email protected]" rel="noopener noreferrer" target="_blank">[email protected]</a>.</p><br /><p><a href="https://www.ft.com/content/bca965bc-b786-44a6-9fec-27f7448ea215" rel="noopener noreferrer" target="_blank"><strong>Read a transcript of this episode on FT.com</strong></a></p><hr /><p style="color: grey; font-size: 0.75em;"> Hosted on Acast. See <a href="https://acast.com/privacy" rel="noopener noreferrer" style="color: grey;" target="_blank">acast.com/privacy</a> for more information.</p>
Key Insights
- The hosts argue that Warsh's 15 years as a Fed critic from the outside will fundamentally change once he faces the actual pressures and accountability of being Fed chair
- Warsh holds contradictory monetary policy views, simultaneously advocating for lower interest rates while supporting aggressive Fed balance sheet reduction
- The hosts identify a concerning pattern where Warsh appears more hawkish on monetary policy under Democratic presidents than Republican ones
- Warsh believes AI will drive productivity gains similar to the 1990s internet boom, justifying looser monetary policy despite limited current evidence
- The hosts express alarm about Warsh's support for increased Fed-Treasury cooperation, viewing it as a potential threat to central bank independence
Topics
Transcript
Today's markets move fast. Get the insights you need in 10 minutes with The Barclays Brief, a new podcast from Barclays Investment Bank. Through sharp dialogue and scenario-based analysis, our leading experts analyze key market themes each week. So, whether you're managing a portfolio or leading a business, The Barclays Brief podcast can help you make smarter decisions today. Stay sharp. Stay briefed. Find Barclays Brief wherever you get your podcasts. Are you expecting a bonus this spring? Do you work in the UK? If you do, take the FT's anonymous bonus survey. Early indications show a lot of our British listeners are expecting big payouts this year. But how about you? Go to ft.com slash bonus or click the…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Unhedged
The Fed’s silent treatment
The resurgence of US-Iran conflict has pushed oil prices higher and created market uncertainty about whether the Federal Reserve under new Chair Kevin Warsh will raise interest rates. Warsh's philosophy of minimal communication and reliance on market discipline rather than forward guidance is creating confusion about the Fed's inflation response strategy.
Software stocks got crushed. Did they have it coming?
Software stocks have been crushed (down 21% year-over-year) due to fears that AI will eliminate the need for enterprise software, but hosts Rob Armstrong and Katie Martin argue this market reaction is likely overdone given the massive switching costs and regulatory complexity of mission-critical business systems. Meanwhile, concentration risk in AI-related stocks poses broader systemic concerns, with AI companies now accounting for half the S&P 500 despite fundamental uncertainties about how the technology translates to profits.
Halftime for the markets
The Unhedged podcast discusses market volatility in the first half of 2026, marked by a significant rotation away from the Magnificent Seven tech stocks toward small caps and other sectors. Despite geopolitical threats and internal market turbulence, the hosts debate whether softer-than-expected June jobs numbers could allow the Federal Reserve to avoid raising interest rates, potentially supporting continued asset price appreciation in the second half of the year.
New UK prime minister, same bond market
UK markets are reacting calmly to incoming Prime Minister Andy Burnham, despite his left-wing reputation, because inflation threats are easing and he has presented himself as fiscally disciplined. The gilt market's real sensitivity depends on Bank of England rate policy and whether Burnham can deliver growth to escape the UK's structural economic constraints.
Why are investors so jumpy?
Hosts Rob Armstrong and Dara McFadden discuss the causes of recent equity market volatility, centered on a surprisingly strong May jobs report that paradoxically spooked markets by raising fears of higher interest rates. They also examine concerns about narrow market breadth, weakening real wages, oil supply risks from the Strait of Hormuz, and the upcoming SpaceX IPO and its potential impact on market liquidity.