Newly appointed Federal Reserve Chairman Kevin Warsh is leading his first Federal Open Market Committee (FOMC) meeting since taking office, and the market widely expects the meeting to maintain the current interest rate unchanged.

This meeting was not just a simple interest rate decision announcement, but also a crucial window for the market to observe Warsh's reform ideas and whether the Fed's independence can continue. Multiple historical issues and external inflationary pressures are intertwined, making it difficult to promote large-scale policy adjustments in the short term.

The first interest rate meeting had many highlights, with the consensus being that interest rates would remain unchanged.

The two-day policy meeting began on Tuesday and concluded on Wednesday. After the meeting, Walsh will hold his first press conference since taking office.

Columbia Law School professor Kathryn Judge said that global markets will be highly focused on this meeting, paying attention not only to the interest rate outcome, but also to Walsh's practical approach to adjusting the meeting process and reshaping the external communication model.



As early as the nomination hearings in April, Warsh proposed institutional reforms to the Federal Reserve's operating model, but industry experts judged that such adjustments could not be implemented quickly. Judge stated that Warsh's primary task was to build trust with the rest of the committee, and the policy legacy of previous Federal Reserve chairs would also constrain the pace of short-term reforms.

Walsh has publicly stated that seeking the truth about the economy is more valuable than frequently speaking out, leading the market to predict that he may reduce the frequency of his press conferences.

The current inflationary environment significantly limits policy maneuvering. Labor Department data shows inflation has risen to a three-year high of 4.2%, mainly due to the previous Middle East conflict pushing up gasoline prices. Even if the US and Iran reach a ceasefire agreement to ease energy pressures, the lingering effects of inflation have not dissipated, and the market believes that the Federal Reserve has neither the need to raise interest rates nor the conditions to lower them.

Multiple historical problems have hampered the pace of reform.

President Trump nominated Walsh to succeed Jerome Powell in January, but his nomination process was delayed for months by North Carolina Republican Senator Thom Tillis, only securing a crucial vote after the Justice Department suspended its investigation into the Federal Reserve headquarters renovation project. Previously, the Justice Department had sent a grand jury subpoena to the Fed to investigate congressional testimony surrounding the $2.5 billion renovation project, a move Powell considered political interference. Washington federal prosecutor Jeanine Pirro has also stated that if new evidence emerges, a criminal investigation may be reopened.

Although Powell stepped down as Chairman of the Federal Reserve, he will remain a member of the Board of Governors until his term expires in 2028. He said he would try to keep a low profile, but his long-term presence will inevitably change the atmosphere of discussion within the committee, which is an important reason why Warsh can only promote reforms step by step.

The independence of the Federal Reserve has become a core point of contention, with the president's demands and policy objectives diverging.

The Federal Reserve operates independently by law, and its monetary policy is based solely on economic data and is not subject to administrative interference, but the White House's stance always affects market sentiment.

The president has repeatedly criticized Powell, declaring his support for Walsh's completely independent decision-making upon his inauguration. In a recent interview, he openly called for interest rate cuts, arguing that high interest rates stifle economic growth and that only lower rates can unleash development potential. The federal funds rate directly impacts household credit costs and the pressure of paying interest on US Treasury bonds, creating a clear contradiction between the demand for rate cuts and the current high-inflation environment.

Judge's analysis suggests that even if the president provides easing space in the short term, the policy honeymoon period is unlikely to last. Although the market is highly focused on whether the Federal Reserve can withstand administrative pressure, the first meeting is unlikely to release a clear signal. Warsh needs to find a balance between the president's demands, inflation data, and the differences among committee members.

In summary , Warsh's first policy meeting is expected to keep interest rates unchanged, and the communication mechanism may see minor adjustments. However, constrained by high inflation, the internal structure of the committee, and legacy issues from historical investigations, deep-seated institutional reforms can only be implemented gradually. How the Federal Reserve maintains its policy independence will become a key focus for the market in the long term.