Warsh Turns Fed Guidance On Its Head: Markets Now Set the Pace for Policy

Fed Chair Kevin Warsh argues for a market-driven approach to policy, saying inflation remains too high and that the jobs report alone won’t dictate the Fed’s next move. He introduces a real-time framework (inflation breadth, payrolls, unemployment, and initial claims) and a six‑cluster view of market signals to gauge whether financial conditions tighten or loosen after data, signaling that markets may shape the Fed’s rate path more than the Fed dictates it.