On the Eve of the Federal Reserve Leadership Change: A “Beige Book” Warning and the Crossroads of Policy Independence

In mid-May 2026, the Federal Reserve is about to undergo the most controversial chair transition in modern history: Kevin Warsh will officially succeed Jerome Powell as Chair of the Federal Reserve. Powell breaks the tradition of the past 75 years by continuing to serve as a member of the Board of Governors after stepping down as chair. This arrangement has been widely interpreted by the market as a political compromise between the White House and the Federal Reserve that is not “fully decoupled.” Warsh’s policy stance shows a subtle “hawk-dove mix”: hawkish on inflation management and balance-sheet management, emphasizing monetary policy discipline and framework reshaping, and having publicly criticized the Fed’s ultra-loose policies of the past 20 years as “seriously deviating from its mission”; but dovish on the path for long-term interest rates, recognizing that technological progress naturally restrains inflation, and supporting rate cuts when data allows. This mixed stance has left the market divided over the monetary policy path in the “Warsh era,” and has also become a key source of uncertainty in the May crypto market’s macro pricing.
The Federal Reserve policy meeting ended on April 30, Powell’s final meeting as Chair. As the market broadly expected, the federal funds rate was kept unchanged at 3.50% to 3.75%. The signals conveyed by the post-meeting statement and Powell’s press conference were somewhat complex: on one hand, Powell said clearly that the impact of rising energy prices on inflation “has already begun to show” and “may further widen in the short term.” He also explicitly stated, “At present, no officials support rate hikes, but some officials argue for cutting the dovish tone of the statement.” On the other hand, Powell emphasized that after stepping down he “will not become a shadow chairman,” trying to reassure the market about concerns that the Fed’s policy independence could be undermined. However, just days after the meeting ended, divisions within the Fed became apparent: Stephen Milan, a governor nominated by Trump, cast a dissenting vote in favor of rate cuts; and “hawkish bigwigs” such as the Cleveland Fed President Hamak and the Minneapolis Fed President Kashkari also cast dissenting votes (but with the aim of keeping rates unchanged). The intensity of internal divisions within the Fed has cast a high degree of uncertainty over Warsh’s first policy meeting after taking over.
The Federal Reserve “Beige Book” released on April 16 provides valuable on-the-ground perspective for understanding the true state of the U.S. economy today. The report shows that among 12 Federal Reserve districts, 8 are maintaining modest to moderate expansion, 2 districts see economic activity basically unchanged, and 2 districts experience a slight to moderate decline. The most closely watched inflation-related wording is: “Energy and fuel costs have risen significantly across all 12 districts.” Businesses generally report that increases in input costs exceed increases in sales prices, compressing profit margins. Company decisions regarding hiring, pricing, and capital investment have become more complicated, and “watching and waiting” has become the most common business strategy. For crypto assets, the core signal conveyed by the Beige Book is this: although the U.S. economy has not fallen into recession, growth momentum is being eroded by energy-driven inflation, and the Fed’s rate-cut path will be more circuitous than previously expected. For the crypto market, which is known for being highly sensitive to liquidity, this still presents a suppressive macro backdrop in the medium term.