Warsh Era Could Redefine Fed Policy, Markets Brace for Change

The article flags a potential shift in U.S. monetary policy if Kevin Warsh replaces Jay Powell, signaling an end to forward guidance and the quarterly dot plot; Warsh would push for a smaller Fed balance sheet and view QE as fiscal policy, relying on rate policy to influence the economy. It also suggests adopting the trimmed-mean PCE as the inflation gauge could justify earlier rate cuts, affecting yield curves and volatility. However, funding-market stability may cap how much policy tools are changed.