The four dollar threshold

**SPEAKER_1** (0:00)
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**Kai Ryssdal** (1:34)
Okay, new game. What is Kevin Warsh thinking? But this time, you got four and a half minutes to figure it out. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kai Ryssdal. It is Monday today, the 20th of July. Good as it always is to have you along, everybody.
There is the war, of course, and its attendant economic trickle down. There are consumers in this economy because we get a vote on what happens too. There's business sentiment and a zillion other things that are going to affect which way this economy goes in the short and medium term. But way up high on that list is what Federal Reserve Chairman Kevin Warsh is thinking. It is early days yet in the Warsh era, but even after his testimony last week on Capitol Hill, it is tricky to figure out exactly what he is thinking. So we've called Wendy Edelberg. She's a senior fellow at the Brookings Institution, also one of our go-tos for all things big picture. Wendy, it's great to have you back.

**Wendy Edelberg** (2:41)
Nice to be back.

**Tom Collins** (2:42)
All right.

**Kai Ryssdal** (2:42)
So let's take Chairman Warsh at his word. He is speaking in declarative sentences when he says, we are going to get inflation under control. The committee will do what it takes. It is, I don't know if we use these words, but he says, you know, it's our solemn oath.
What does that translate into for you?

**Wendy Edelberg** (3:00)
I am surprised that the market is putting so little weight on possible rate cuts. The market seems to be betting that Kevin Warsh will revert to his traditionally hawkish instincts and disappoint Trump the way that Powell did. And that's certainly possible, but I would not bet so strongly against Trump getting at least some of the rate cuts he wants. I mean, second term, Trump has achieved so many of his goals on other fronts. And indeed, I see Warsh as already laying the intellectual groundwork for rate cuts.

**Kai Ryssdal** (3:32)
All right, keep going. You got to spell that out then.

**Wendy Edelberg** (3:35)
All right. So he's already, he's created these five task forces, examining issues including inflation measurement. He thinks that like the official measures may not be, you know, adequate.
The effects of AI policy rules, the balance sheet, those task forces are going to report over the next months. And, you know, the way he talked about them with Congress, I think he's telegraphing that this work will eventually produce an analytical case for lower rates, without any suggestion that he's responding to pressure from the White House.

**Kai Ryssdal** (4:07)
Don't you think, though, I mean, that he torpedoes his own credibility if he, in essence, gives the president what he wants, having constructed this intellectual framework?

**Wendy Edelberg** (4:17)
I mean, it's a coincident of wants, potentially. So take the way he talked about artificial intelligence at the hearing.
He, you know, just I'm quoting him exactly. He said, will it increase measured prices over the course of the next 12 months? I suspect it will. But whether that's inflationary or not, that's up to the Federal Reserve. And we're going to have something to say about that. That's an extraordinary thing for the chairman of the Fed to say.