LPL Research examines Warsh’s evolving Fed approach, infrastructure-led growth, and the impact of China demand on oil prices.

A hawkish debut. At his first Federal Open Market Committee (FOMC) meeting, Chair Kevin Warsh paired a hawkish, minimalist tone — tersely emphasizing price stability — with the launch of five task forces to review key aspects of Federal Reserve (Fed) policy. Many Fed governors want to follow the Bank of Japan’s lead and hike rates in the near term.

Uncertainty in projections. While officials’ projections show a split on future rate hikes and a higher path for rates, alongside elevated inflation forecasts, uncertainty remains high, underscored by Warsh’s decision not to submit projections. Importantly, with inflation seen as partly supply-driven, the Fed could turn less hawkish if geopolitical tensions ease.

Constructive ambiguity and growth. Overall, the Fed appears to be shifting back toward “constructive ambiguity,” with the outlook hinging on Middle East developments and a steady, near-trend growth backdrop supported by investment and productivity gains. We believe the ongoing infrastructure buildout is supporting growth, while weaker demand from China is weighing on oil prices.

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