Warsh’s Paradox: Hike Now, Ease Later Please ❤️like, bookmark🔖, and 🔁share with fellow investors In this Short video, @AxelMerk and @AdamTaggart discuss the paradox at the heart of Kevin Warsh’s Fed strategy: he may need to hike rates now in order to create the credibility and flexibility to ease later. * The idea is that Warsh could hike once, perhaps twice, in 2026 as an early demonstration that his Fed is serious about inflation. It’s not necessarily the beginning of a prolonged tightening cycle. Instead, the goal may be to convince the bond market that the Fed remains committed to price stability, even when doing so is politically or economically uncomfortable. * That credibility matters because Warsh ultimately appears to favor lower rates and stronger economic growth. A central part of his framework is the belief that the U.S. is entering a productivity boom. If productivity accelerates, the economy can potentially grow faster without generating the same inflationary pressure, creating more room for lower rates. But there’s a catch: the Fed can only “let the economy run” if inflation is contained and inflation expectations remain anchored. * That perhaps helps explain why the Fed might hike even if the latest inflation data haven’t changed dramatically. Warsh’s Fed doesn’t want markets to conclude that 3% inflation has quietly become the new 2%. It needs to demonstrate that the 2% target still means something. * Warsh also appears to be trying to redefine the relationship between the Fed and financial markets. The Fed can never simply be a passive referee because every policy decision moves markets, but Warsh seems to want the central bank to have less of a “thumb on the scale” and become less directly involved in managing market outcomes. * Geopolitics makes the balancing act even harder. Warsh has to reconcile potentially stronger productivity and economic growth with inflation risks that could emerge from geopolitical disruptions and other supply-side pressures. The historical analogy is the Greenspan Fed: once a central bank establishes strong inflation-fighting credibility, it can potentially maintain easier monetary policy without markets immediately assuming it has abandoned price stability. * That’s the Warsh paradox: prove your hawkish credentials early, reinforce the 2% inflation target and earn the bond market’s trust. If that credibility sticks and inflation cooperates, the reward could be considerably more flexibility to cut rates and let the economy run in 2027. Hike now so you can ease later. #KevinWarsh# #ratehike# #bondmarket# $TLT $BND 💡 Get access to notes with the key takeaways from this interview with @AxelMerk by visiting @AdamTaggart 's Thoughtful Money Substack (link below) ⬇️