Former Fed Governor Warsh Says US Central Bank Should Change its Ways

Central Bank

Forex

Summary:

He urged the Fed to stop relying on "data dependence" to guide its decisions, and on forward guidance to let the public know where rates may be headed.

Former Federal Reserve Governor Kevin Warsh, with whom President Donald Trump is reported to have discussed firing U.S. central bank chief Jerome Powell and installing him in his place, on Friday unleashed a barrage of criticism of the Fed and argued for fundamental changes to how it operates.

While saying he believes in the "operational independence" of the Fed, Warsh told a conference in Washington organized by the Group of Thirty, an international body of financiers and academics, he believes the Fed has gone beyond its remit and undermined its own claims to independence.

He urged the Fed to stop relying on "data dependence" to guide its decisions, and on forward guidance to let the public know where rates may be headed. And he blamed the central bank for aiding the expansion of the U.S. national debt and for allowing inflation to surge after the COVID-19 pandemic.

"Fed claims of independence in bank matters undermine the case for independence in the conduct of monetary policy," Warsh said. "And when the Fed turns away from its creed and tradition, exercising powers that are the province of the Treasury Department, or taking positions on societal issues, it furtherjeopardizes its operational independence in what matters most."

NERVOUS MARKETS

Trump has repeatedly criticized Powell for not cutting interest rates since the Republican president took office in January. His escalating rhetoric against the Fed chief, along with hints he might try to remove him, triggered on Monday a selloff on financial markets that were already under pressure from fears that Trump's sweeping tariffs could send the U.S. economy into a recession.

Trump has since said he has no intention of firing Powell and also appears to have backed off his aggressive trade war with China.

The Wall Street Journal reported that Trump has privately been talking about firing Powell for months, discussing the possibility with Warsh as recently as February. The WSJ said Warsh advised the president to leave Powell as Fed chief until his term expires in May 2026.

Trump's interest in having Warsh, a Republican who served in former President George W. Bush's administration and previously worked for Morgan Stanley, take over the top Fed job dates to his first term as president, when he ended up picking Powell instead to replace Janet Yellen.

The president soon soured on Powell, railing publicly about too-high interest rates. In 2020, he called out Warsh at a White House signing of a China-U.S. trade pact and said he "would have been very happy" to have him heading the Fed instead of Powell.

Warsh, currently a visiting fellow at Stanford University's Hoover Institution and an advisor to the Duquesne Family Office LLC, was a Fed governor from February 2006 to April 2011, leaving about a year before Powell became a governor.

During his tenure at the Fed, Warsh was frequently an advocate for tighter, not easier, monetary policy and criticized the Fed's expansionary balance sheet policy. While stating the Fed must maintain monetary policy independence, Warsh also has argued it should not overstep its financial stability role to rescue banks, and should not expect autonomy for other functions, including regulatory policy or consumer protections.

Treasury Secretary Scott Bessent has said the administration will start interviewing candidates for the top Fed job in the fall.

Source: Reuters

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Manuel

Stocks

Economic

A packed upcoming week for markets will test a U.S. stocks rebound, with investors focused on a wave of corporate results led by Apple and Microsoft, while the prospect of global trade developments threatens to cause volatility at any time.

The monthly U.S. employment report, data on first-quarter U.S. economic growth and an inflation update add to the potential market-sensitive events in the coming week, as investors weigh whether the recent strength suggests the worst of a tariff-induced equities tumble is over.

With the S&P 500 on pace for a solid week of gains, the U.S. benchmark index has pared its recent slide by about half but remains down some 10% from its February record high.

Sentiment for equities has been lifted this week by signals of easing in the Trump administration's trade stance, including possible de-escalation with China. But the situation remains fluid and fresh developments on tariffs could undermine the market gains.

"There seems to be some potential for compromise on the tariff situation," which has supported the recent rally, said Michael Mullaney, director of global markets research at Boston Partners.

But stocks will remain sensitive to "the news flow that day," Mullaney said. "If it's positive on tariffs, the market goes up. If it's negative on tariffs, the market goes down."

Investors are bracing for more twists and turns on trade after President Donald Trump this month paused many of the heftiest import tariffs on other countries until July. Trump's pullback came after his April 2 announcement of sweeping levies set off severe stock volatility and rattled the bond market.

Tariff uncertainty will be a critical topic for upcoming corporate reports.

About 180 S&P 500 companies representing over 40% of the index's market value are set to post quarterly results in the coming week, according to UBS. Chief among them are Apple, Microsoft, Amazon and Meta Platforms, four of the "Magnificent Seven" megacap tech and growth companies whose shares have faltered in 2025 after putting up massive gains the prior two years.

With over one-third of S&P 500 companies having reported, profits are on pace to beat expectations for the period. S&P 500 earnings are on pace to have climbed 9.7% in the first quarter from a year ago, up from an estimate of an 8% gain on April 1, according to LSEG IBES.

"People were expecting the worst, and that typically happens when markets retrench," said King Lip, chief strategist at BakerAvenue Wealth Management in San Francisco. "But the numbers really haven't been that bad."

Still, some companies have pointed to challenges ahead. Consumer staples company Procter & Gamble, soda and snacks company PepsiCo and medical equipment maker Thermo Fisher all cut their annual profit forecasts.

Investors also will watch the extent to which the new global trade regime is hitting economic data, with broad concerns the new tariffs will drive up prices and slow growth.

Data in the coming week includes gross domestic product for the first quarter, and the March reading of the personal consumption expenditures price index, a key inflation reading.

The monthly U.S. jobs report, due on May 2, could provide the biggest test for markets. The labor market has demonstrated stability in recent months, and employment is expected to have climbed by 135,000 jobs in April, according to a Reuters poll.

But doubts about the economic outlook are being fueled by dour readings in consumer sentiment and other surveys, with investors eager to see if such troubling "soft data" will translate into weakness in reports seen as giving more concrete evidence about the economy.

"If the consumer is going to be the engine of ongoing growth in the U.S., it puts the burden of proof onto the jobs report," said Bob Savage, head of markets macro strategy at BNY.

Source: Reuters

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Manuel

Cryptocurrency

Political

Paul Atkins’ first public event as chairman of the U.S. Securities and Exchange Commission was a crypto roundtable on Friday, where the new agency chief devoted his inaugural speech to assuring the industry that he'll continue to remake securities policy to favor digital assets innovation.

The agency and industry have been awaiting congressional action to establish crypto market-structure oversight that will likely set guardrails, and Atkins told an audience at the SEC's Washington headquarters that the regulator will work toward delivering "a rational, fit-for-purpose framework" for crypto.

However, in answer to a question from CoinDesk after his speech, Atkins indicated that the agency may be able to act to some degree during this wait for new laws.

"It's always good to have Congress' input, and if there's a statute to back up what we're doing, I think that's all the better," Atkins said. "But we have ample room to maneuver under existing rules and laws."

Atkins further suggested that he thinks the concept of special-purpose crypto broker dealers, a little-used registration most prominently represented by Prometheum, has been very successful and may need to be reconsidered, and he said the agency will look at whether custody rules need to be changed to "accommodate crypto assets and blockchain technology."

Atkins previously appeared at a swearing-in ceremony earlier this week in the White House, where Trump said "he's the perfect man to lead this agency" at a time when the digital assets sector needs regulatory clarity, and Atkins said a "top priority of my chairmanship will be to provide a firm regulatory foundation for digital assets." But Friday's event at the SEC's headquarters represented his first full-fledged engagement with the public.

The crypto sector has high hopes for Atkins, though his stand-in for the past few months — Commissioner Mark Uyeda — already took a number of decisive actions to reverse the regulator's earlier crypto reluctance under former Chair Gary Gensler. As interim chairman, Uyeda reversed or sidelined a number of crypto policy efforts pursued under Gensler and has abandoned most of the regulator's prominent enforcement actions targeting the industry.

Until now, industry expectations for Atkins' leadership were based on conjecture rooted in his experience advising and investing in digital assets firms, especially since his Senate confirmation hearing failed to explore his crypto views.

Atkins had served as an adviser to crypto entities such as the Digital Chamber and as a board member of tokenization firm Securitize, and his ties to Off the Chain Capital had previously linked him to its investment stakes in big crypto companies like Digital Currency Group (DCG) and Kraken.

Friday's roundtable was the third in a series the agency has held on crypto matters, this time focused on custody in the industry. Crypto custody has been a particularly dicey topic at the agency, which under Gensler's reign had sought to approve a policy demanding investment advisers put their clients' digital assets only with certain qualified custodians. Gensler had argued that the rule was meant to exclude most of the existing crypto platforms as suitable custodians, but the effort was put on ice.

Atkins was asked by reporters on the event's sidelines about President Trump's own crypto interests and whether Trump's memecoin, $TRUMP, will rob credibility from the White House on industry policy.

"I have no comment on any of that," Atkins said.

Source: Coindesk

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Manuel

Political

Economic

China–U.S. Trade War

The European Union will do all it can to engage with the U.S. on trade and reduce the massive uncertainty that is weighing down the global economy, Irish Finance Minister Paschal Donohoe said on Friday, underscoring unity among the bloc's members.

"What we are trying to do in our engagement with the U.S. through the (European) Commission is try to identify ways in which we can reduce that uncertainty and find a way of reaching an agreement," Donohoe told Reuters during the spring meetings of the International Monetary Fund and World Bank in Washington.

The meetings have been dominated by a tsunami of tariffs announced by U.S. President Donald Trump, including a 10% tariff on most countries except China, Mexico and Canada. The import duties have upended the global trading system and are dampening growth.

The IMF on Tuesday slashed its economic forecasts for the U.S., China and most countries, citing the impact of U.S. tariffs now at 100-year highs and warning that rising trade tensions would further slow growth. It forecast global growth of 2.8% for 2025, a cut of half a percentage point from its January forecast.

Donohoe said he was confident the EU would remain unified in its dealings with the U.S. EU Commissioner for the Economy Valdis Dombrovskis is due to meet with U.S. Treasury Secretary Bessent on Friday.

On Wednesday, Dombrovskis stressed that the EU would prefer to reach a negotiated solution with the U.S. over trade but will respond with countermeasures if discussions do not lead to a solution.

"The trade competence is very clearly with the Commission," Donohoe said. "We will be supporting the Commission in their work and working hard to maintain unity and consensus in the Commission's work, which they are doing an excellent job in maintaining."

Donohoe said this week's meetings in Washington left no doubt about the risks facing the global economy.

"I'm walking away from these meetings with a clear sense of everything that is at stake and the risks that are there for jobs, for growth, for living standards all over the world," he said. "The meetings here ... reminded me of why we need to leave no stone unturned in the next few weeks and months to see how we can reduce that uncertainty."

Source: Reuters

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Adam

Cryptocurrency

Bitcoin continued to soar Friday morning, surging above $95,000 per coin as stocks remained mostly flat.

The biggest cryptocurrency by market cap was recently priced at $95,354, CoinGecko data shows, after rising by nearly 2% over a 24-hour period. In the past seven days, it has risen nearly 13%.

Bitcoin rose as high as $95,563 earlier Friday. That's the highest price recorded since February 24.

Bitcoin's jump comes after the coin took a hit earlier this month and traded below $75,000, following announcements from President Trump about his planned "reciprocal" global trade tariffs.

The stock market and other "risk-on" assets also took a beating and have since recovered—but Bitcoin has recovered more.

"Crypto's behavior the last few days has been different to stocks," GSR Research Analyst Carlos Guzman told Decrypt. "[Crypto investors] thought the worst of tariff news was over, and investors are buying back in," he added, noting that Bitcoin's narrative as a store-of-value asset is strengthening.

Bitcoin and other major crypto assets have in the past traded with U.S. equities—in particular, tech stocks.

The new Bitcoin ETFs have received huge amounts of cash from bullish investors: Since Monday, investors have pumped over $2.6 billion into the funds, data from Farside Investors shows.

Investors shorting Bitcoin and other cryptocurrencies are having their positions closed due to the crypto market's rise. CoinGlass data shows that over the past day, nearly $300 million in positions have been liquidated, with shorts making up $193 million worth.

Of that number, almost $78 million were in Bitcoin short positions—speculators betting on the asset to drop in price.

Other major digital coins and tokens such as Solana, Dogecoin, and Ethereum have all risen significantly over a seven-day period. Solana was recently trading at $152, while Dogecoin was priced above $0.19. Ethereum, the second-biggest coin, was recently trading for $1,800.

Source: decrypt

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Adam

Forex

Economic

The dollar headed for its first weekly gain since mid-March on Friday after China granted some tariff exemptions for U.S. imports, raising hopes that the trade war between the world's two largest economies may be closer to abating.

The U.S. currency has been whipsawed this week by conflicting signs for a thaw in the fraught relations between Washington and Beijing.

On Tuesday, U.S. President Donald Trump suggested a de-escalation of their tit-for-tat tariff battle, saying direct talks were already underway. By Friday, a number of businesses that had been notified of the changes said China had granted some exemptions from its 125% tariffs on U.S. imports and was asking companies to identify the goods that could be eligible.

Trump, in an interview with Time magazine published on Friday, said his administration was talking with China to strike a tariff deal and that Chinese President Xi Jinping has called him. Beijing, however, continues to dispute the U.S. characterization of the talks.

The dollar rose against a basket of currencies , up around 0.2% on the day and set for a modest weekly gain, its first since the middle of March.

"I don't think that anything's necessarily much clearer now, but it does feel like there's no more ramping up. It feels like it's coming the other way and if anything, it seems to be heading more towards de-escalation than escalation," said City Index market strategist Fiona Cincotta.

However, even with some exemptions in place, there was still not enough clarity over the bigger picture to fully reverse some of the investor flows out of the dollar, which has dropped 4% since Trump first announced his "Liberation Day" tariffs on April 2.

"We have seen this pull out of oversold territory. But it's definitely too early to be cracking open the champagne for the dollar recovery, we're not quite there yet," said Cincotta.

SAFE HAVENS DROOP

The dollar was up 0.82% on the day against the yen at 143.775 and was up 0.42% against the Swiss franc at 0.82985 francs.

The euro fell 0.24% to $1.1363, while the pound declined 0.12% to $1.332, even after surprisingly strong UK retail sales figures.

Trump had rocked the dollar at the start of the week, sending it spiralling lower against other major currencies with his threats to fire Federal Reserve Chair Jerome Powell for not cutting interest rates quickly enough. It then jumped back on Tuesday when the president said he never had any intention of replacing the central bank boss.

Washington has made some progress in early trade talks with Asian allies South Korea and Japan.

The Japanese Finance Minister Katsunobu Kato said after meeting U.S. Treasury Secretary Scott Bessent that there were no talks on currency targets. Trump has accused Tokyo of weakening its currency to help its exporters.

Japan's chief negotiator Ryosei Akazawa, who is also economy minister, will hold a second round of trade talks with Bessent next week.

"Even if reports are correct that there will be some easing of tariff rates, a hit to U.S. growth is still coming that will ensure volatility levels remain higher, equity markets are pressured to the downside and the global backdrop remains unfavourable for any sustained move higher in dollar/yen," said MUFG strategist Derek Halpenny.

Bank of Japan Governor Kazuo Ueda on Thursday reiterated the central bank's commitment to raising interest rates if underlying inflation moved towards the 2% target as projected. But he repeated that policymakers needed to scrutinise the fallout from U.S. tariffs.

The BOJ is widely expected to leave rates unchanged at its two-day meeting that ends on May 1.

Reporting by Hannah Lang in New York and Amanda Cooper in London; additional reporting by Kevin Buckland; Editing by Marguerita Choy and Joe Bavier

Source : reuters

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Thomas

Central Bank

China–U.S. Trade War

Japan may have averted U.S. pressure for a stronger yen in bilateral finance talks on Thursday, but a closer look at officials' descriptions of the meeting suggests currencies and the Bank of Japan's interest rate policy may remain key factors in broader trade negotiations.

Speaking to reporters after his first face-to-face talks with U.S. Treasury Secretary Scott Bessent on Thursday, Japanese Finance Minister Katsunobu Kato said they did not discuss exchange-rate targets or a framework to manage yen rates.

There was no accusation made by the U.S. that Japan was intentionally weakening the yen, according to a Japanese finance ministry official who accompanied Kato.

But Kato was tight-lipped on the details of the 50-minute meeting with Bessent, which was held on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.

When asked whether the U.S. made any specific requests to Japan, Kato said: "I can't comment because that goes straight into actual discussions." The U.S. Treasury Department had issued no statement about the Kato-Bessent meeting as of early Friday afternoon.

Still, there were some hints.

For one, Kato said Japan and the U.S. will continue close and constructive dialogue on exchange rates "in relation to the ongoing bilateral trade negotiations" - language some analysts saw as a sign Washington could make demands on the yen as part of broader trade talks.

The meeting preceded top Japanese trade negotiator Ryosei Akazawa's scheduled visit to Washington next week for a second round of bilateral trade talks that may prove tortuous for the U.S.

U.S. President Donald Trump's focus on addressing the trade deficit, and his past remarks criticizing Japan for intentionally maintaining a weak yen, have fueled market expectations that Tokyo will face pressure to strengthen the yen's value against the dollar and give U.S. manufacturers a competitive advantage.

"President Trump strongly believes that Japan and China have been intentionally depreciating their currencies. There's little sign of him changing that view, so markets remain cautious," said Tsuyoshi Ueno, senior economist at NLI Research Institute.

"If next week's trade negotiations between Akazawa and Bessent do not go well, Washington's attention could turn towards exchange rates again," he said.

BOJ RATE HIKES

Another key sign was Kato's remark that he explained to Bessent Japan's recent economic developments "including wage hikes." He added that in doing so, he also talked about Japan's "price developments."