Around 2 a.m. Beijing time on Thursday (June 18), Kevin Warsh will hold his first press conference as Federal Reserve Chairman.

Unlike his predecessor Jerome Powell, who faced constant public pressure from the president, Warsh enjoys the full trust of the White House and has greater policy maneuvering space. Leveraging this political advantage, he plans to push forward with systemic reforms of the Federal Reserve, but faces multiple obstacles including internal disagreements, fluctuating market expectations, and constraints from existing decision-making mechanisms. This press conference will be a crucial starting point for the implementation of his policy blueprint.

The president delegated considerable power, giving Walsh room to maneuver with a more relaxed policy approach.

Sources familiar with the matter said the president fully trusts Warsh and has given him ample leeway in making independent decisions. Previously, Trump had repeatedly pressured Powell to cut interest rates, leading to a long-standing tense relationship between the two; now, Trump has recently publicly stated his support for Warsh's complete autonomy in policy-making.

From a regulatory perspective, the Federal Reserve is independent, reporting only to Congress and not subject to direct presidential interference. Warsh also made it clear at his April nomination hearing that he was willing to listen to opinions from all sides regarding interest rates, but the final decision-making power rests with the Federal Reserve. Neither the White House nor the Federal Reserve has commented on the relationship between the two, and there is widespread concern in Washington that this trust is difficult to maintain in the long term, given the precedent of presidents changing the attitudes of political allies.

The market generally expects the Federal Reserve to keep interest rates unchanged at this policy meeting , and Trump will not view this move as a confrontational act.

With the president's trust, Walsh does not need to deliberately cater to short-term interest rate cut demands and can steadily advance his reform plan, including measures such as gradual interest rate cuts, reducing the trillion-dollar balance sheet, and reconstructing inflation assessment standards. However, all reforms require careful consideration of his own political credibility to ensure their steady implementation.

Internal divisions among committee members exacerbate the difficulty in building policy consensus.

The current Federal Open Market Committee (FOMC) is deeply divided, creating internal obstacles for Warsh to push forward with reforms.

Stephen Miran, a board member who had previously strongly advocated for interest rate cuts, has resigned. Christopher Waller, another dovish board member, stated in May that a rate hike is possible this year if inflation fails to decline. The latest core personal consumption expenditure inflation rate is 3.3% year-on-year, well above the 2% policy target. Coupled with the previous Middle East conflict pushing up energy prices, Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack have both expressed expectations of a rate hike this year.

With the US and Iran reaching a framework agreement and the Strait of Hormuz potentially reopening to navigation, energy inflationary pressures are easing. Warsh can then use this opportunity to argue his long-term view that artificial intelligence will drive economic growth without pushing up inflation. The US added 172,000 jobs in May, and the unemployment rate remained stable at 4.3%, indicating strong overall economic resilience. However, market expectations have shifted from interest rate cuts at the beginning of the year to at least one rate hike this year, requiring Warsh to reshape market expectations.

Previously, Powell would coordinate the committee members' views in advance, making disagreements at the meetings extremely rare; the three dissenting votes in April were particularly noteworthy. Walsh does not deliberately avoid disagreements, advocating for a "candid internal dialogue model" of full committee debate. He criticizes the mechanism of fully recording the two-day meetings as suppressing the expression of genuine opinions.

Mickey Levy, a senior fellow at the Hoover Institution, believes that the policy statement will likely remove dovish language favoring rate cuts to address the objections of the three committee members. However, adjusting the rules for meeting minutes would consume significant political capital, and Warsh may prioritize shelving the plan.

The entrenched decision-making framework and the numerous obstacles to reforming multiple mechanisms

The personnel and decision-making system established during Powell's tenure has been fully retained, and Walsh only temporarily hired two external policy advisors, without making large-scale changes to the management team.

The long-standing informal decision-making group of the "Big Three" (the Federal Reserve Chairman, Vice Chairman, and New York Fed President) remains the core consultation platform. Current Vice Chairman Philip Jefferson and New York Fed President John Williams have long held key positions, naturally possessing policy influence and serving as the core foundation for building consensus. Market rumors suggest lobbying Warsh to push for Williams' early retirement, but no such action has been taken yet. He doesn't reach the mandatory retirement age until June 2028, and adjusting the Big Three structure would consume significant political capital.

The capital market is also a significant implicit constraint. Mark Spindel, founder of Potomac River Capital, stated that the bond market is equivalent to a voter on the committee. Warsh plans to change the core inflation measure but has not announced a clear alternative, deliberately retaining flexibility in adjustments. Significant changes to the indicator could easily provoke opposition from committee members and staff, and the market, due to the ambiguity of the policy path, would demand higher bond yields to compensate for the uncertainty.

Short-term press conferences balance the demands of all parties and pave the way for long-term reforms.

In summary, the first press conference is a crucial window for Warsh to buffer the conflict and buy time for reforms. He can present maintaining the interest rate unchanged and removing the easing guidance as a unified outcome of full discussion among all committee members, thereby demonstrating his new deliberative style. This would both stabilize market expectations and align with the White House's demands, while also buying time for deeper reforms such as adjusting inflation calculation standards and reducing the balance sheet.

While short-term market volatility is difficult to completely avoid, Warsh is expected to gradually resolve internal and external contradictions and steadily implement the Fed's comprehensive mechanism reforms, relying on the president's trust and the opportunity for improved inflation brought about by the easing of geopolitical tensions in the Middle East.