Weekly Commentary: Warsh In His Own Words

2026-04-25 04:00:30 ET

Prospects for timely resolution of Strait of Hormuz issues appear bleak. WTI crude surged $10.55, or 12.6%, this week to $94.40. The Bloomberg Commodities Index's 3.5% rally boosted 2026 gains to 24%. Ten-year Treasury yields rose five bps to 4.30%, outperforming other vulnerable bond markets. UK Gilt yields jumped 15 bps to 4.91%, with Italian yields up 10 bps to 3.78%. Major equities indices were down 4.3% in Spain, 3.2% in France, 2.3% in Germany, and 2.5% in Italy. Not a worry in the world, major U.S. indices closed the week at record highs.

Senator Katie Britt: "I think we would all say you are absolutely the right man for the job at the right time in our country's history, and I am excited about your leadership at the Fed."

Senator Dave McCormick: "He is the right man for this pivotal moment."

I am reminded of 2018 when Jay Powell took the reins of the Federal Reserve - in what was a pivotal period for monetary policy. Fed assets had inflated $1.6 TN (56%) over the previous five (non-crisis) years to surpass $4.4 TN. The new Chair's plan was to significantly shrink the Fed's balance sheet. I strongly supported what I believed was Powell's intention to reduce the Federal Reserve's footprint while beginning the process of forcing distorted markets to stand on their own. Well, QT was abruptly abandoned the following year. In a major policy error, the Powell Fed inflated holdings by $400 billion in the months leading to the pandemic. Fed assets surpassed $7 TN by June 2020 - on their way to the $8.924 TN March 2022 peak....

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