Will the U.S. Federal Reserve raise interest rates or cut them?

The Federal Reserve meeting in June that everyone was watching has ended: rates were kept unchanged, neither raised nor lowered, and that matched expectations. How did risk assets perform? They stumbled a little at first, then pulled back. Many people looked at the dot plot of 18 Federal Reserve officials—half leaning toward raising rates, and only one choosing to cut—and it was enough to spark panic, with people thinking that we were about to enter a rate-hike cycle. This is completely unnecessary. If you make decisions based on that, you’re likely to get trapped. Let me explain why.

In yesterday’s article, I said that Warsh is clearly a Trump-aligned figure. It’s not only because Trump just pushed him into the role, but also because of his ties through his family: Warsh’s father-in-law is the owner of Estée Lauder, he is a Trump classmate, and he is a longtime financial backer and close friend of Trump. So no matter what Warsh says or does now, you should not doubt this. His short-term statements and actions may be a smokescreen, but in the long run, deep down he is definitely Trump-aligned—completely different from the situation with the previously appointed Powell.

Therefore, his long-term goal must be to cut rates—there is no question about it—because rate cuts are a core demand of Trump, and it’s also the point he has been relentlessly criticizing Powell over.

But what if Warsh, as soon as he comes in, carries out Trump’s intentions without regard for anything else? Then he will be portrayed as a puppet. And a puppet figure cannot help Trump to the fullest. Moreover, once the independence of the Federal Reserve is damaged, a large amount of capital will pull out of the U.S.—and that is something Trump does not want to see. So what would Warsh do? He would definitely need to first establish an “independent persona,” meaning: “Isn’t he (Trump) calling for rate cuts? I won’t cut first—I’m not taking orders from him.”

How does he establish this independent persona? The best approach is to be “driven purely by data,” i.e., “I don’t make forecasts. I don’t even know what I’ll do next. I only look at the data—nobody else’s words can influence me.” So Warsh sets a hard benchmark: the inflation rate. He wants to bring the inflation rate below 2% before considering rate cuts.

And we know the Iran issue is being resolved step by step. The Strait of Hormuz is about to reopen, and at that time oil prices will return to pre-war levels—or even lower. Then the inflation rate will fall. If Warsh wants to further strengthen his “strongman image,” he can endure a bit longer, carry it on for another couple of terms, and then he can openly cut rates on the grounds of “data-driven” logic. At that moment, nobody will connect his rate-cutting behavior to Trump’s intentions anymore.

Trump and Warsh: one is a crazy, off-the-cuff businessman who talks without a script, while the other is a well-dressed, perfectly composed financier. The latter appears to be there to keep the former’s unpredictability from harming the economy or the people’s livelihoods. But you must always remember—they’re on the same side. So, no matter what Warsh says or what he does in the short term, if you want to predict Warsh’s long-term behavior, the only one you need to watch is Trump. #我的Gate交易时刻