This has been a historic year for Wall Street and investors — and we still have more than five months to go. Since mid-May, we've witnessed the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and widely followed Nasdaq Composite (NASDAQINDEX: ^IXIC) climb to record highs.
More importantly, we observed an ultra-rare changing of the guard at America's foremost financial institution, the Federal Reserve. President Donald Trump's handpicked successor to Jerome Powell was officially sworn in on May 22, becoming only the 17th Fed chair since the central bank's inception in December 1913.
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Uncertainty is common on Wall Street when a new Fed chair takes the reins. But this time truly is different. In addition to Warsh ascending to his new role amid a three-year high in U.S. inflation, he's pledged to overhaul the Federal Reserve's ideology.
While some of these changes may prove beneficial to the Federal Open Market Committee (FOMC), the 12-person body, including Warsh, responsible for setting the nation's monetary policy, the two words persistently repeated by Fed Chair Warsh, which define his early tenure, could prove detrimental to Wall Street.
When testifying before the Senate Banking Committee in April, prior to his confirmation as Fed Chair, Kevin Warsh outlined several reforms he wanted to introduce. In no particular order, Warsh:
Was critical of the Federal Reserve expanding its balance sheet when it wasn't necessary, and alluded to a deleveraging of the central bank's assets.
Criticized the use of forward-looking guidance in the context of policymaking, implying that the central bank should only be providing equity markets with facts, not postulations.
Introduced his own definition of inflation, which is a mix of how former Fed Chairs Paul Volcker and Alan Greenspan defined price changes.
But it's not Kevin Warsh's new-age thinking that's set to define his leadership of the Fed. Rather, it's his laser-focused efforts to stabilize prices.
All FOMC members (voting and nonvoting) aim to uphold the dual mandate of maximum employment and price stability. But with unemployment hovering near an all-time low for years and inflation vaulting to a three-year high of 4.2% in May, the new Fed chair has made his and his peers' priority clear in two words: price stability.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
