Warsh’s Real Test Is the Reaction Function!! Kevin Warsh’s real test is not whether he can sound like Paul Volcker. It is whether he can do what Alan Greenspan did after Volcker: preserve price stability while updating the Fed’s understanding of growth. Yes, it’s all about changing the Fed’s reaction function !!! Greenspan recognised that oil shocks acted like a tax, transferring purchasing power rather than proving domestic overheating. Even, Ben Bernanke, showed how monetary tightening could amplify those shocks, turning temporary supply disruptions into deeper recessions. The issue is not 25 basis points. It is how the decision was made and explained. If the Fed still treats growth as bad and inflationary, then its reaction function has not changed and the strategy of letting the economy run hot into the early 2030s to reduce the debt burden on the economy is at risk. Too many critics are being pedantic about the hike while missing the signal.