Federal Reserve chairman Kevin Warsh made one thing perfectly clear Wednesday after his first meeting as the central bank’s new leader: He and the policymaking Federal Open Market Committee are committed to driving inflation down to the Fed’s long-stated goal of 2%.
“I am pleased to report that members of the FOMC are unambiguous and unanimous: This committee will deliver price stability,” Warsh said during a press conference after the two-day meeting.
Beyond that — and the 12-member FOMC’s unanimous decision to leave the benchmark interest rate in a range of 3.5% to 3.75%, at least for now — Warsh declined to discuss the direction of future rate policy, even though nine of the 19 overall governors in the Federal Reserve system indicated that they expect the central bank to approve at least one rate increase this year because of stubbornly high inflation that an oil price shock from the Iran war has worsened.
Only one of the governors favored a rate cut before the year ends. Warsh, who does not believe in giving forward guidance, did not offer a projection.
Drew Pope, president of the 16-member Independent Boat Builders Inc., told Trade Only Today that although Warsh has historically taken a hawkish stance on interest rates, “in recent years he has made comments indicating he was slightly more dovish, or in favor of rate cuts. His abstention from providing a rate forecast makes it difficult to say what policies he favors now or how it will impact the boating industry.
“Rising costs and boat affordability is a primary focus and concern of Independent Boat Builders Inc. and our owner/builders,” Pope added. “While many builders would not like to see borrowing costs increase for our retail customers, controlling inflation to prevent further escalation in material costs is more impactful than the monetary policy shifting by 25 to 50 basis points over the short term.”
Warsh deflected several reporters’ questions about the direction of future Fed policy by referring to one or another of the five task forces he said he will soon be establishing to review the Fed’s operations and study the issues the central bank faces.
The committees include one that will focus on how the Fed communicates with businesses and consumers, one on the Fed’s balance sheet — which Warsh has said he wants to shrink — one on possibly improving the sources of data that federal agencies compile and that Fed policymakers consult to guide their decisions, one on productivity and the job market, and one on the ways the Fed analyzes inflation.
Warsh acknowledged, however, that if he were to encounter an unhappy consumer in a supermarket aisle, he would not just tell the guy that he has a task force working on solutions to rising inflation.
“If I saw somebody in the grocery store, what I would say to them is that we cannot have a very significant effect on particular prices,” Warsh said. “The price of oil in the markets or the price of a dozen eggs does not have first-order consequences to what we’re doing.
“But we have an important job there,” he added. “And it’s to make sure that those changes in oil, or beef, or eggs, or milk don’t broaden in the economy, don’t have second- and third-order effects. That’s our commitment, our capability, and we’re going to deliver on it.”
Shawn DuBravac, chief economist at the National Marine Manufacturers Association, told Trade Only Today that a rate increase is a tool the Fed can use when there is too much demand in the economy.
“The pressure right now is mostly an energy supply shock because of the Iran war, which can’t be easily addressed by a rate hike,” DuBravac said. “The Fed cannot do much about the price of oil or other goods. Its job is to keep those increases from broadening into second- and third-order effects. They are watching for price increases to seep into wages and expectations, and then [will] move only if they do.”
DuBravac said the financial markets read Warsh and the FOMC as hawkish on Wednesday. All three major stock market indexes, for example, fell by amounts ranging from 0.98% (the Dow Jones industrial average) to 1.34% (the Nasdaq Composite Index).
“The odds of a September [rate] hike jumped from roughly 27% [on Tuesday] to around 49% [on Wednesday],” DuBravac said. “Projections embedded in the Summary of Economic Projections also looked more hawkish. In March, the median dot implied a 3.4% [federal] funds rate by year-end. Today the median is 3.8% for the end of this year, with nine of the 18 submitted projections looking for a hike before December.
“But it is also important to recognize that the median expectation sees a 3.6% rate by the end of 2027, so the dots are telling us that if we do see a hike in the coming months, it will likely be followed by cuts next year,” he added. “The FOMC is telling us that the need to raise rates is largely a temporary dynamic and probably not the front edge of a sustained tightening cycle.”
DuBravac said the question-and-answer session of the press conference was more balanced than news headlines afterward suggested and likely less hawkish than the markets perceived.
“Warsh noted that half his colleagues think the rate should be at [the current] level or lower by year-end, and half think higher,” he said. “The FOMC is more evenly divided about future rate hikes, and this is probably a result of the source of inflation” — the energy market.
DuBravac said Warsh pointed to the housing market as a sector of the economy where the Fed’s current rate policy is restricting growth.
“Other interest-rate-sensitive categories, like boating, are closely adjacent and could be perceived likewise,” DuBravac said. “Boating demand is driven by confident households with rising real incomes. Inflation and uncertainty broadly weigh on that confidence.
“If the Fed can successfully tame inflation while maintaining strong growth and full employment, the way Warsh suggested they will, confidence should improve and, in turn, boating demand should strengthen,” he added. “The real challenge for the Fed is to restore price stability without breaking the job market.”
The Fed’s much discussed dual mandate — maximizing employment while minimizing inflation — can be a difficult tightrope. Raise rates to fight inflation, and the central bank risks stifling economic growth and job creation; cut rates to stimulate the economy, and it risks igniting inflation.
“I don’t believe that we have a cruel choice,” Warsh told reporters. “I don’t share the view that was expressed a few generations ago that Federal Reserve chairmen show up at a podium and say you’ve got to choose. And you’re going to have to decide whether you’re willing to tolerate higher inflation to put more people to work.
“I don’t believe in that,” he added. “What I believe is if we do our job, we can make strong growth, low prices and strong employment mutually compatible. So what you heard from the committee today is we’ve got some work to do on the price stability front.”
Former NMMA president Thom Dammrich was encouraged by what he saw the Warsh-led Fed do and say about the economy after the new chairman’s first meeting on the job.
“The Fed’s decision to hold steady on interest rates is the right decision, as is their leaning to potential interest rate increases later this year if inflation fails to come down,” Dammrich told Trade Only Today. “The boating interest is being hurt more by inflation than by interest rates, which are reasonably low. Getting inflation under control and wages increasing faster than inflation is important to getting the middle class back on its feet and helping the boating industry thrive.
“Chairman Warsh’s comments that the Fed remains committed to its dual mission of price stability and full employment is a strong positive, in my opinion,” added Dammrich, who is now an adviser at Global Marine Business Advisors. “I am also encouraged by the leadership he has shown in creating the five task forces to look at Fed communications, balance sheet policy, jobs and productivity, data gathering and inflation frameworks. This is a great start for the new Fed chairman.”
Ian Wyatt, senior vice president and chief economist at recreational marine lender Huntington Commercial Bank, told Trade Only Today that the Fed clearly signaled Wednesday that it sees the economy as being in a very different place than it was just six months ago.
“The Fed described economic activity as growing at a ‘solid pace,’ and there is ‘strong’ productivity and [capital expenditure] activity,” Wyatt said. “The change toward a more positive view of economic activity reflects a shift in the data. Over the past three months job growth has averaged 188,000 jobs per month, whereas over the prior year (February 2025 to February 2026) we averaged just 13,000 jobs per month.
“Meanwhile, the Fed described inflation as ‘well above’ target,” Wyatt added. “This also marks a shift driven by the data. The latest [Consumer Price Index] inflation data hit the highest level in three years. Inflation is also likely pushing through the supply chain, as companies are paying more not just for gasoline, but also for chemicals and metals. Given the direction of the economy, the signal today was that the Fed is very unlikely to cut and could hike rates this year.
“We still expect rates to remain unchanged this year, as about half the governors want to keep rates steady and half want to hike, but the hiking half likely have less influence because the regional governors, who have a more hawkish bias, have less voting power.”
