Just now! The new Federal Reserve Chair hasn't taken office yet and is already slapped with "inflation," as Powell's doppelgänger storyline unfolds. Are risk assets like $BTC about to collapse?

Kevin Woorh has not yet officially taken office as Federal Reserve Chair but is already facing a barrage of criticism.
Written by: Zhao Ying
Source: Wall Street Insights

Kevin Woorh is about to assume the role of Federal Reserve Chair but faces a challenging policy legacy—resurgent inflation, deepening internal divisions, and political pressure from the White House.
This scene eerily resembles the historical misjudgment of inflation by Powell six years ago, but this time, external variables are more complex.

According to The Wall Street Journal on Wednesday, the Senate is expected to formally confirm Woorh as Fed Chair this week.
On the eve of the confirmation vote, the U.S. Bureau of Labor Statistics released April CPI data showing a 3.8% year-over-year increase in consumer prices, the largest monthly YoY rise in nearly three years, exceeding market expectations of 3.7%.
Core CPI (excluding food and energy) accelerated to 0.4% month-over-month, up from 0.2% in March, and rose to 2.8% YoY.

Nick Timiraos, a reporter known as the “New Fed Correspondent,” pointed out that this CPI report is the latest signal indicating that the market’s previous expectations for rate cuts by 2026 are no longer viable.
Traders are increasingly leaning toward the view that the Fed may not cut rates at all this year, with some institutions even discussing whether rate hikes are necessary.

For Woorh, about to take over the Fed, the core risk is: whether he chooses to follow political pressure and cut rates early or to stick to the inflation target and maintain rates, both paths will have profound impacts on the Fed’s credibility and independence.

Powell’s Legacy: An Expensive Misjudgment
By focusing on price stability, Powell’s eight-year tenure leaves a record of “significant failure.”
His most notable policy mistake occurred between 2020 and 2022.
At that time, the Fed introduced a new monetary policy framework, explicitly stating it would tolerate higher inflation in the short term to achieve an average 2% inflation target over the long term.

Subsequently, under the combined effects of large-scale fiscal stimulus and persistently low interest rates, inflation surged sharply, reaching a peak annual rate of 9.1% in June 2022.
Powell characterized this inflation as “transitory,” missing the window to tighten policy in advance.
Although Powell later admitted that the Fed should have raised rates earlier, and the subsequent tightening cycle successfully avoided a recession, inflation has never returned to the 2% target.

The Fed has repeatedly had to halt rate cuts because inflation’s resilience repeatedly exceeded expectations.
Now, the unexpected rebound in April CPI data indicates that this issue remains unresolved as Powell departs.

April CPI: Structural Inflation Pressures Emerge
The troubling aspect of April’s inflation data lies not only in the overall figures but also in its internal structure.
Breaking down the components, housing prices rose 0.6% month-over-month, and non-energy services prices increased 0.5%, with a YoY increase of 3.3%.
Clothing prices have risen 4.2% over the past year, and appliance manufacturer Whirlpool announced a 10% price hike in April.

Meanwhile, inflation has outpaced wage growth, with real average hourly earnings down 0.3% YoY for the first time in three years.
Timiraos focused on the structural changes in inflation.
He pointed out that after excluding energy and housing, service prices rebounded in April, complicating the dovish narrative.

The dovish narrative previously centered on the idea that inflation pressures would be confined to goods, explained as the fading effects of tariffs, thus the Fed need not consider rate hikes.
However, service sector inflation often reflects domestic demand rather than one-time supply shocks, making it harder to dismiss.

Timiraos also highlighted a sharp rise in airline ticket prices—possibly driven by Iran war-related increases in jet fuel costs or reflecting broader domestic price pressures—making signals difficult to interpret and further complicating policy judgments.
He emphasized that the Fed’s real concern is not the monthly data itself but the resurgence of public inflation expectations:
Once consumers and businesses believe high inflation will persist, a wage-price spiral could self-reinforce, making it difficult for the Fed to cut rates quickly even if the economy slows.

Woorh’s Dilemma: Cutting or Not Cutting, Both Are Risky
Woorh faces a situation described by many economists as “impossible.”
On the inflation front, energy shocks caused by the Iran war are driving prices higher, with about 40% of April CPI increases related to this.
The Wall Street Journal notes that overreacting with rate cuts to address energy shocks could accelerate inflation;
Conversely, raising rates to counter the temporary oil price shock could trigger a recession.

Politically, the Trump administration continues to pressure for rate cuts.
Treasury Secretary Bessent refused to promise in a Senate Banking Committee hearing that if Woorh does not cut rates as Trump wishes, he will not be prosecuted, only saying it “depends on the President.”
Trump has previously stated that if Woorh signals a willingness to raise rates, he will not receive a nomination.

Internally, the Federal Open Market Committee (FOMC) last month saw the most dissenting votes since 1992, with three regional Fed presidents refusing to endorse rate cuts, indicating growing internal resistance.
Woorh will also face a Fed Board and regional Fed presidents’ team that overlaps heavily with Powell’s era, including Powell himself—who plans to remain on the Board until his term ends.

Timiraos pointed out that the future direction of Fed discussions will largely depend on whether fuel and commodity transportation in the Persian Gulf can return to normal.
If disruptions persist, internal debates will find it difficult to marginalize rate hikes.

Challenges and Changes: Can Woorh Chart a Different Path?
The Wall Street Journal believes Woorh has the policy skills and intellectual reserves to address these challenges.
One of his plans is to initiate a comprehensive review of the Fed’s inflation models early on to see if they can provide more accurate policy signals—considered a pragmatic step aimed at addressing the repeated “inflation misjudgments” of Powell’s era.

However, Woorh also faces resistance from the establishment.
Former Fed Chairs Ben Bernanke, Janet Yellen, and a group of Democratic economists do not agree with Woorh’s attempt to challenge the post-financial crisis monetary policy framework.

Ironically, Powell’s heavy cost for labeling inflation as “transitory” six years ago serves as a cautionary tale.
Today, Woorh inherits an inflation environment full of uncertainties, with temporary energy shocks intertwined with structural service sector inflation pressures, making policy signals ambiguous.

Whether the lessons of six years ago will truly be learned may be the most important test of Woorh’s tenure.

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