Americans hoping for relief from high borrowing costs did not get it after the Federal Reserve left its benchmark rate unchanged 4 days ago at Kevin Warsh’s first meeting as chair, ensuring continued debt bondage for those reliant on credit while savers with accumulated capital continue to benefit from higher returns. The federal funds rate remains at a range of 3.5% to 3.75%, meaning Americans will continue to pay similar rates on credit cards and personal loans. Conversely, savers continue to benefit from higher returns on certificates of deposit and high-yield savings accounts.
Warsh stated the central bank would deliver "price stability," asserting the Fed cannot have "a very significant effect on particular prices," such as gas and groceries. He clarified the Fed's "important related job" is "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." Warsh declared, "That’s our job. That’s our commitment. That’s our capability we’re going to deliver on." This commitment to "price stability" primarily serves to protect the purchasing power of accumulated capital.
The Fed’s preferred inflation gauge, the personal consumption expenditures price index, is due Thursday morning and covers May. This release follows closely watched inflation data, including the CPI for May, which registered a three-year high of 4.2% 1 month ago. A major driver of this inflation was identified as the Iran war-related rise in energy prices, directly linking the costs borne by the working class to imperialist ventures. CNBC reported that oil prices have since fallen on news of peace talks and a reopening of the Strait of Hormuz, suggesting that a reduction in geopolitical tension could provide some relief on inflation in the coming months.
Nine members of the Federal Open Market Committee (FOMC) project room for a rate hike before the end of 2026, while eight members foresee the Fed holding the range steady, and one sees room to cut. These projections for a hike appear to be a response to inflation that has surged since the start of the Iran war and three months of solid job growth. This framing suggests that even a robust labor market can be used as a pretext for policies that could lead to wage suppression and increased borrowing costs. The Fed previously cut rates three times earlier this year in response to concerns about a slowing labor market, demonstrating its responsiveness to capital's needs when growth falters.
Who Bears the Cost
The central bank maintains little influence over home loan rates, which track the 10-year U.S. Treasury note. Warsh broke precedent by not submitting his projections for the federal funds rate in the Fed’s quarterly Summary of Economic Projections. This lack of forward guidance could translate into more market volatility, with more fluctuations in the stock market and 401(k)s, impacting those whose retirement savings are tied to the speculative market.
President Donald Trump, who appointed Warsh 3 months ago, dismissed the Fed’s decision to hold rates steady 4 days ago. Trump told reporters in Paris, "It’s all right. Whatever," adding that while he knows a rate hike could come later this year, "It’s hard to believe. It just keeps the country down." Despite this rhetorical flourish, Trump called Warsh a "good guy" and said he’s "guided by" what Warsh wants to do, indicating a fundamental alignment with the central bank's role in managing the capitalist system.
The State's Mandate
Warsh called for "regime change" at the Fed 2 months ago during his Senate confirmation hearing. In his first news conference, he announced new task forces focused on five areas of monetary policy: the Fed's communication, its balance sheet, its use of and reliance on existing data sources, its inflation framework, and productivity and jobs. Warsh stated he plans to appoint both Fed insiders and outsiders to these task forces, which will provide recommendations to policymakers this fall. These internal adjustments, framed as "regime change," aim to refine the mechanisms of capital management rather than challenge its underlying purpose.
Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, observed, "A lot of times, people will create a task force to do something that they already want to do." Ajilore added that "sometimes just because things happen the way they are happening does not always mean it’s the right way," suggesting that even proposed reforms may serve to reinforce existing structures. Mike Skordeles, Truist’s Head of U.S. Economics, affirmed that Warsh "wants to do the right thing" and "He’s not looking to flip the table and blow up the Fed," underscoring the limited scope of any changes under the new leadership.
Christian Hoffmann, head of fixed income at Thornburg Investment Management, noted that "Monetary policy is often presented as science, but it’s still very much art, and the current global framework is far from perfect." Hoffmann also stated, "It’s basic game theory: a new Fed Chair has to establish credibility early," and, "If Chair Warsh doesn’t pick a fight with inflation at the outset, it’s extremely hard to rebuild credibility later." This highlights the central bank's role in managing the confidence of the capitalist class and ensuring the stability required for continued capital accumulation.