Kevin Warsh appeared at the European Central Bank's Sintra forum on July 1 alongside Lagarde, Bailey, and Macklem and said what he has said at every public appearance since taking the chair: inflation is too high, the Fed will deliver price stability, and he will not tell the market what the Fed will do next. [1]

The numbers behind those statements are not contested. The Fed's June 17 statement held the federal funds rate at 3.5 to 3.75 percent. [2] The May Consumer Price Index registered 4.2 percent, the highest in three years, driven by the Iran war's impact on energy prices and tariff pass-through on imported goods. At Sintra, Warsh said that if anyone thought the Fed would be "comfortable with an inflation objective above 2 percent, well, I guess they'd be disappointed." [1] He declined to say whether the July 28 FOMC meeting would produce a hike, hold, or cut.

The Slaughter connection

When this paper covered the Slaughter ruling on July 1, the story specifically named the Fed carve-out as the load-bearing exception. The majority held that the Federal Reserve's unique combination of monetary policy and financial stability functions creates a sufficient constitutional distinction to survive the Humphrey's Executor overruling. NLRB and FTC commissioners serve at presidential will. The Fed chair does not — for now.

That "for now" is not a footnote. Warsh's public emphasis on political independence, repeated at Sintra and at his first press conference, is the statement of a chair who knows exactly what the Slaughter carve-out means for his institutional position. [3] No case in any circuit is currently testing that carve-out. No administration official has publicly threatened to invoke removal authority against the Fed chair. But the doctrinal protection that gave the Fed's institutional independence its constitutional foundation was, until June 29, shared with the FTC and the NLRB. The FTC and NLRB no longer have it.

The July 28 meeting

Market consensus, as of this edition, expects a hold at the current 3.5 to 3.75 percent target range on July 28. [1] That consensus is built on Warsh's consistent refusal to provide forward guidance — which means the market is reading his tone and his inflation assessment rather than any stated path. His "too high" language at Sintra is not a forecast of a hike; it is a characterization of the current level that leaves every option open. [1]

The inflation data before the July 28 meeting will include June CPI. If June shows tariff pass-through accelerating — as the August 1 rate implementation of goods already in transit would predict — Warsh's "too high" language will be tested against a number that moved further above target rather than toward it. That test, and its result, is the paper's next chapter on this thread.

-- THEO KAPLAN, San Francisco