Kevin Warsh’s first Fed test is here: He must navigate hawks ‘on the offensive’ and Wall Street’s hunger for details on regime change

The mood of press conferences may be lighter. In his confirmation hearing, Warsh shared anecdotes about friends in the room. He cracked a joke or two—even in the face of a grilling from Senator Elizabeth Warren about his personal assets.

But Wall Street shouldn’t settle in for a breezy chairman, ready to air the details of central bank thinking. Indeed, Warsh has suggested he would like to roll back elements of forward guidance in order not to subject the Fed to a predetermined path.

Warsh’s confidence, in part, may be thanks to his familiarity with the rigmarole of central banking—he previously served as a governor under Chairman Ben Bernanke between 2006 and 2011, through the great financial crisis. But while he has that familiarity (and a few weeks of “how-do-you-dos” under his belt), the FOMC meeting will be the first meeting of minds between hawks on the committee and his potentially dovish stance.

Wall Street generally expects Warsh to want to cut rates—President Donald Trump said he wouldn’t nominate anyone to the role if they weren’t—though the former Morgan Stanley executive director has insisted he has made no promises to the White House (or anyone) on the path of monetary policy.

His dovish inclination (derived from bullishness on the potential of AI, tightening on the long end of the curve, and a shrinking balance sheet) will likely be tested in his first meeting. As Bank of America’s U.S. economist Aditya Bhave noted to clients this morning, hawks will be “on the offensive.”

Referring to the dotplot (a chart which records each policymaker’s individual projection on the course of short-term rates), Bhave wrote: “Our base case is that there will be three dots showing 25-50bp of hikes in 2026: Hammack, Logan and Schmid. But it’s possible that others, such as Kashkari, Musalem and Goolsbee, might also project hikes this year.”

Warsh has been critical of the dotplot tool in particular, and while throwing out the metric entirely may be a pace too quick for a behemoth like the central bank, the chairman may abstain from sharing his prediction. “We assume that Warsh will not submit dots,” Goldman Sachs’s David Mericle echoed this week.

What does a ‘regime change’ entail?

Warsh has been something of a critical friend to the Fed in his time away from the central bank. He has suggested the U.S. has become a “banana republic” because the central bank so reliably buys government debt, growing its balance sheet and distorting markets as a result. Likewise, he told an IMF conference in April 2025 that the Fed needed to right-size its relationship with the public, saying the institution “should find new comfort in working without applause and without the audience at the edge of its seats.”

Warsh has described the latter speech as—albeit tough—a “love letter, more than a cold critique.” He explained on the Hoover Institution’s Uncommon Knowledge podcast: “It’s a love letter because the institution’s … important. It’s a love letter because if the institution can reform itself, then there can be great things for the institution and the country. But it does mean that it’s time to get things back on track.”

With so much ammunition in his own beliefs, Warsh is finally in the position to make some changes. It’s a guarantee that the Fed won’t change overnight: Not only is it too large, but Warsh wouldn’t want to see markets revolt because they are uncertain about the central bank’s reliability.

As Jim Reid at Deutsche Bank wrote to clients yesterday: “The leadership transition introduces a higher-than-usual degree of uncertainty around both policy signaling and communication style. While an immediate policy shift is unlikely, the meeting will be closely scrutinized for early indications of how Warsh intends to reshape the Fed’s framework, particularly given his stated ambition for a broader ‘regime change’.”