[Rush Lindell] You know what nobody wants to say?
[Rush Lindell] Trump started the Iran war,
[Rush Lindell] broke the Fed's rate cut path,
[Rush Lindell] and is still out there demanding cheaper money.
[Rush Lindell] That is the full story.
[Rush Lindell] Welcome to the Rush Lindell Show.
[Rush Lindell] I'm Rush Lindell.
[Reagan] And I'm Reagan.
[Reagan] Glad you're with us today.
[Reagan] This one's worth your hour.
[Rush Lindell] So here's what happened.
[Rush Lindell] Kevin Warsh gets sworn in May 22nd. Big ceremony.
[Rush Lindell] Trump's right there promising rates are coming down very quickly.
[Rush Lindell] Five weeks later,
[Rush Lindell] Warsh's first FOMC meeting.
[Rush Lindell] held; rates stay right at three and a half to three and three quarters; unanimous twelve to zero!
[Reagan] And the dot plot flipped completely:
[Reagan] Fox Business reported nine of eighteen officials are now projecting a rate hike, not a cut; in March not one of them penciled in a hike.
[Rush Lindell] Wow! Not one,
[Rush Lindell] zero,
[Rush Lindell] and now half the room wants to go higher.
[Rush Lindell] That's a full reversal in three months.
[Reagan] What changed?
[Reagan] CPI hit four point two percent in May.
[Reagan] A three-year high per CNBC.
[Reagan] Energy-driven,
[Reagan] tied directly to the Strait of Hormuz disruption that started February twenty eighth.
[Rush Lindell] The day the Iran war launched!
[Rush Lindell] See,
[Rush Lindell] that's the thesis of the whole show today:
[Rush Lindell] the Administration created the oil shock,
[Rush Lindell] the oil shock broke the inflation picture,
[Rush Lindell] and now the man they put in charge of the Fed can't give them what they asked
[Reagan] Right.
[Rush Lindell] for!
[Reagan] And Warsh didn't even submit his own dot,
[Reagan] refused to put a forecast in.
[Reagan] CNBC flagged that before the meeting; he's also announced five task forces to overhaul how the Fed communicates and manages its balance sheet.
[Rush Lindell] We've also got a parody segment that practically writes itself,
[Rush Lindell] and Reagan will tell you why the joke lands harder than it should.
[Reagan] Because the economics are real.
[Rush Lindell] And we close on what Warsh walks into in the July twenty ninth meeting:
[Rush Lindell] a fragile cease fire,
[Rush Lindell] an IRGC cargo ship attack,
[Rush Lindell] and an October
[Speaker 3] twenty ninth meeting.
[Rush Lindell] And October high cods climbing.
[Rush Lindell] First up, the setup.
[Rush Lindell] Before we dive in,
[Rush Lindell] a quick reminder.
[Rush Lindell] We love hearing from you. If you have questions or topics you'd like us to cover,
[Rush Lindell] head to the link in the description and submit your question.
[Rush Lindell] We read every single one.
[Rush Lindell] May twenty second,
[Rush Lindell] East Room of the White House,
[Rush Lindell] Supreme Court Justice Clarence Thomas swears in Kevin Warsh as the new Fed chair.
[Rush Lindell] Trump steps to the mic and says,
[Rush Lindell] I want Kevin to be totally independent.
[Rush Lindell] Don't look at me.
[Rush Lindell] Don't look at anybody.
[Reagan] And then?
[Rush Lindell] Same day, campaign rally in New York,
[Rush Lindell] Trump tells the crowd rates are coming down very quickly.
[Rush Lindell] You watch what's going to happen.
[Reagan] Both things in the same day.
[Rush Lindell] Both things!
[Rush Lindell] One sentence says don't look at me; the next sentence says look at what I did.
[Rush Lindell] That's the whole set-up,
[Rush Lindell] Reagan—that's the con!
[Reagan] CNBC covered the ceremony,
[Reagan] Warsh's exact words after the oath:
[Reagan] he vowed to act with independence and resolve.
[Reagan] He also said he did not promise rate cuts to get the nomination.
[Rush Lindell] Which give him credit for saying it out loud.
[Rush Lindell] Senate confirmed him fifty four to forty five.
[Rush Lindell] The thinnest margin for a Fed chair ever,
[Rush Lindell] and he walks in already having to prove he isn't Trump's guy.
[Reagan] Right,
[Reagan] the confirmation fight was essentially a proxy war over whether the Fed stays independent.
[Reagan] That shadow follows everything he does now.
[Rush Lindell] So,
[Rush Lindell] Trump fires Powell,
[Rush Lindell] effectively,
[Rush Lindell] installs his pick,
[Rush Lindell] throws a White House ceremony,
[Rush Lindell] tells a rally the cuts are coming,
[Rush Lindell] and then June seventeenth rolls around.
[Reagan] Warsh's first meeting as chair.
[Rush Lindell] Rates stay put three and a half to three point seven five per cent.
[Rush Lindell] Unanimous vote,
[Rush Lindell] and the dot plot nine of eighteen Fed officials now project a rate hike by year end.
[Reagan] Wow.
[Rush Lindell] Nine!
[Reagan] That's a full reversal from March,
[Reagan] when the median projection was still pointing toward a cut.
[Rush Lindell] So Trump's guy held rates and the committee's leaning toward raising them.
[Rush Lindell] You know what nobody wants to say:
[Rush Lindell] Trump didn't get rate cuts; he might get the opposite.
[Reagan] The question I'd push on:
[Reagan] was that outcome ever actually avoidable,
[Reagan] given the inflation picture Warsh inherited?
[Rush Lindell] That is exactly the question,
[Rush Lindell] and the dot plot is just the headline.
[Rush Lindell] What's inside those numbers tells a much darker story.
[Rush Lindell] So the dot plot is where this gets really concrete.
[Rush Lindell] CNBC reported the statement came in at just 130 words,
[Rush Lindell] down from 341 in April.
[Rush Lindell] No forward guidance.
[Rush Lindell] Warsh described it as a bit shorter,
[Rush Lindell] a bit simpler.
[Rush Lindell] Markets read that one signal and sold.
[Rush Lindell] Stocks down,
[Rush Lindell] short-term rates jumped,
[Rush Lindell] all from a statement shorter than most text messages.
[Rush Lindell] That's the whole story.
[Rush Lindell] The whole tell.
[Reagan] And the dot plot itself,
[Reagan] 9 of 18 officials projecting a rate hike before year end.
[Reagan] In March, the median was still calling for a cut.
[Reagan] That's a complete reversal in one quarter.
[Rush Lindell] A complete reversal,
[Reagan] Yeah.
[Rush Lindell] Right.
[Rush Lindell] So what changed between March and June?
[Reagan] CPI hit 4.2% in May,
[Reagan] year over year.
[Reagan] PCE came in at 4.1%. The Fed's own projections show total PCE running at 5%.
[Reagan] running at 3.6% for the full year,
[Reagan] those numbers leave no much wiggle room.
[Rush Lindell] None. And the Iran war started the last day of February.
[Rush Lindell] The Strait of Hormuz disruption roughly 20% of global oil supply.
[Rush Lindell] That's what drove energy prices.
[Rush Lindell] That's why CPI went from around
[Reagan] Right.
[Rush Lindell] 2.4% in January to 4.2% by May.
[Reagan] The Chase investment research team put it plainly: inflation in May was,
[Reagan] quote,
[Reagan] primarily driven by rising energy,
[Reagan] oil,
[Reagan] and gas prices that began in March with the onset of the conflict.
[Reagan] So this isn't a Fed ideology story.
[Rush Lindell] No, it is not.
[Rush Lindell] But here's what I want people sitting in their car right now to understand.
[Rush Lindell] You're paying more at the pump,
[Rush Lindell] your mortgage rate isn't moving,
[Rush Lindell] and the guy demanding rate cuts is the same guy who started the war that caused the price spike.
[Reagan] Now,
[Reagan] Warsh also did something unusual at his press conference.
[Reagan] He refused to submit his own Dot; sat out the forecast entirely; said it's consistent with his "long held views on the SEP Framework.
[Rush Lindell] The chair of the Federal Reserve won't tell you where he thinks rates are going.
[Rush Lindell] That's either principled,
[Rush Lindell] or it's...
[Reagan] Strategic ambiguity—both,
[Reagan] probably—and with seventeen of eighteen officials saying inflation risks are tilted upward,
[Reagan] the direction of pressure is obvious.
[Reagan] Which brings us to the question nobody in the White House wants to answer.
[Rush Lindell] Which is, who actually created this problem?
[Rush Lindell] You know what nobody wants to say?
[Rush Lindell] Trump launched a war on February 28th. The Strait of Hormuz,
[Rush Lindell] one-fifth of global oil supply,
[Rush Lindell] gets choked off,
[Rush Lindell] Brent crude goes from $73 a barrel to over $100,
[Rush Lindell] and suddenly the Fed can't cut.
[Rush Lindell] That's not a monetary policy story.
[Rush Lindell] That's a foreign policy story that crashed a monetary policy meeting.
[Reagan] And the data backs that up.
[Reagan] CNN fact-checked Trump's own inflation claims.
[Reagan] CPI was 2.4% in January and February.
[Reagan] In February,
[Reagan] before the war,
[Reagan] the Fed was penciling in a cut for twenty twenty six; that path was gone the moment the first strike happened.
[Rush Lindell] Gone.
[Rush Lindell] Completely." And the Dallas Fed put out a paper on this.
[Rush Lindell] They called the Strait disruption,
[Reagan] How?
[Rush Lindell] the largest geopolitical oil supply shock in history,
[Rush Lindell] two to three times bigger than nineteen seventy three.
[Rush Lindell] That's not a footnote,
[Rush Lindell] that's the whole cause.
[Reagan] Now I'd push back slightly.
[Reagan] The war had national security justifications we can argue about,
[Reagan] but the economic consequences don't care about the justification.
[Rush Lindell] Right.
[Rush Lindell] The oil market is not moved by your foreign policy rationale; the oil market moves on supply,
[Rush Lindell] and supply got cut.
[Reagan] So you've got a president who created the shock and then on Wednesday,
[Reagan] CNBC reported this,
[Reagan] he said quote,
[Reagan] we need low interest rates.
[Reagan] His own advisors have quietly stopped calling for near term cuts.
[Reagan] Cuts,
[Reagan] but Trump hasn't.
[Rush Lindell] He hasn't gotten the memo-or he's gotten it and doesn't care.
[Rush Lindell] Because here's the thing about this Administration:
[Rush Lindell] the political pressure doesn't follow the economic reality; it runs ahead of it.
[Reagan] And that puts Warsh in a genuinely impossible spot:
[Reagan] he can't cut-inflation won't let him; he can't hike-without ...
[Rush Lindell] infuriating the man who installed him.
[Reagan] Exactly.
[Reagan] And Trump has a very specific history with Fed chairs who ...
[Reagan] To "don't deliver," ask Powell.
[Rush Lindell] So the question now isn't whether Warsh is independent,
[Rush Lindell] it's how long Trump lets him be.
[Rush Lindell] That's the conversation we need to have.
[Rush Lindell] So,
[Rush Lindell] while we're on the Powell parallel,
[Rush Lindell] I want to make that case directly.
[Rush Lindell] Trump picked Powell,
[Rush Lindell] praised Powell,
[Rush Lindell] then spent three years calling him a fool and threatening to fire him.
[Rush Lindell] Now he's got Warsh,
[Rush Lindell] and last Wednesday,
[Rush Lindell] Oval Office,
[Rush Lindell] same guy says low rates will solve everything,
[Rush Lindell] everything,
[Rush Lindell] the border,
[Rush Lindell] the deficit,
[Rush Lindell] your electric bill,
[Rush Lindell] low rates!
[Reagan] Okay,
[Reagan] but Rush slow down for a second because
[Reagan] Warsh is not Powell,
[Reagan] and I think that distinction matters more than the parallel.
[Rush Lindell] Make the case.
[Reagan] Powell never had Trump's actual trust.
[Reagan] From day one,
[Reagan] he was managing a president who resented him.
[Reagan] Warsh starts with real political capital.
[Reagan] CNBC reported that a White House official said Trump has confidence and faith in Warsh and that's changing the whole posture.
[Reagan] Even Navarro walked back his cut calls.
[Rush Lindell] Okay,
[Rush Lindell] I'll give you that; the relationship is different.
[Rush Lindell] But here's what gets me:
[Rush Lindell] it doesn't change the structural trap.
[Rush Lindell] Cut (you validate inflation), hike (you infuriate a President who just said rates solve everything). The trust buys him time:
[Rush Lindell] it does not buy him a way out.
[Rush Lindell] That's fair.
[Reagan] And look,
[Reagan] markets agree:
[Reagan] CME FedWatch is pricing a seventy nine percent chance of a hike by December.
[Reagan] Zero cuts.
[Reagan] The patience from the White House is real,
[Reagan] but it's not infinite.
[Rush Lindell] Trump's patience infinite,
[Rush Lindell] right?
[Reagan] The man does have a track record.
[Rush Lindell] Which brings us to what Warsh is actually doing inside the institution,
[Rush Lindell] because he's not just holding rates and waiting – he's shaping the whole operation.
[Rush Lindell] Five task forces,
[Rush Lindell] a new statement format – that's a different kind of move entirely.
[Rush Lindell] So,
[Rush Lindell] look,
[Rush Lindell] setting aside the rate drama for a second, what Warsh actually did at that first meeting is worth taking seriously on its own terms.
[Rush Lindell] Five task forces-communications,
[Rush Lindell] balance sheet,
[Rush Lindell] inflation framework,
[Rush Lindell] data sourcing,
[Rush Lindell] productivity,
[Rush Lindell] and jobs.
[Rush Lindell] According to CNBC's recap of the June 17th press conference,
[Rush Lindell] no Fed chair in recent history has launched anything this ambitious.
[Rush Lindell] And,
[Rush Lindell] Reagan,
[Rush Lindell] I'll give him that.
[Rush Lindell] Conservatives have wanted someone to attack that $6.7 trillion balance sheet for years.
[Rush Lindell] That thing ballooned from $800 billion to nearly $9 trillion, and nobody in Washington blinked.
[Reagan] Right.
[Reagan] And dumping forward guidance?
[Reagan] Serious monetary economists have argued for a decade that it boxes the Fed in.
[Reagan] Warsh didn't just talk about it,
[Reagan] he stripped it from the statement on day one.
[Rush Lindell] Day one.
[Rush Lindell] very bold,
[Rush Lindell] very principled, and also none of it matters if Trump blows the relationship up in six months because rates are still at three and a half percent.
[Reagan] I mean, that's the tension.
[Rush Lindell] That's exactly the tension.
[Rush Lindell] The reform agenda is real.
[Rush Lindell] Warsh clearly believes it. But you're threading a needle between institutional overhaul and a president who went to a rally the same day he said totally independent and promised rates coming down very quickly.
[Reagan] The question I keep coming back to is,
[Reagan] is a central banker doing the job or a man building credibility so fast that he's hoping the political pressure doesn't catch up?
[Reagan] CHAPTER FOUR THE REFORMS TAKE HOLD
[Rush Lindell] Both!
[Rush Lindell] the answer is both!
[Rush Lindell] He's buying himself cover with the reform optics while holding firm on rates-smart play,
[Rush Lindell] if it works.
[Reagan] And Warsh himself put it pretty plainly.
[Reagan] CNBC quoted him saying the commitment to two per cent is strong,
[Reagan] unanimous and unambiguous.
[Reagan] That's not a man threatening anything-that's a man planting a flag.
[Rush Lindell] Sure,
[Rush Lindell] but here's what I want you to imagine.
[Rush Lindell] What does the political conversation actually sound like right now from the guy demanding cheap money while also running a war that's making everything expensive?
[Rush Lindell] Stay right there.
[Rush Lindell] All right, we're doing it-mock press conference time.
[Reagan] Oh no.
[Rush Lindell] My fellow Americans,
[Rush Lindell] inflation is out of control.
[Rush Lindell] The Fed must cut rates immediately.
[Rush Lindell] Also, we're sending another carrier group to the Gulf.
[Reagan] Those two statements cannot coexist.
[Rush Lindell] Wrong-they coexist beautifully.
[Rush Lindell] Cheap money and bombs-that's leadership.
[Reagan] Right.
[Reagan] See,
[Reagan] here's what he's actually asking:
[Reagan] Can you run wartime energy inflation at the same time as peacetime interest rates?
[Reagan] The answer from any economist on earth is no.
[Rush Lindell] DETAILS
[Reagan] The Pentagon's own controller told the Senate Armed Services Committee that he could not close the books on the department's spending for the past year, because the books are in such a mess.
[Speaker 3] Services Committee in May that the Iran war had already run up $29 billion in operational costs,
[Rush Lindell] Wow.
[Reagan] and that number wasn't counting base repair in Kuwait and Bahrain.
[Rush Lindell] You cannot pump that kind of wartime spending into an oil-shocked economy and then demand the Fed hand you cheap credit on top.
[Rush Lindell] Okay,
[Reagan] but I'm right though,
[Reagan] right?
[Reagan] That's exactly what's happening.
[Rush Lindell] That's the bit.
[Rush Lindell] The IEA called this the largest oil supply disruption in the history
[Speaker 3] of the United States.
[Rush Lindell] In the history of the global oil market,
[Rush Lindell] you've got wartime fiscal pressure,
[Rush Lindell] a closed Strait of Hormuz,
[Rush Lindell] inflation at four point two percent,
[Reagan] And
[Rush Lindell] and the demand is still cut rates.
[Reagan] the Fed can't say that out loud.
[Reagan] Warsh, without naming Trump,
[Reagan] pointed to the Iran war as a key cause of high inflation.
[Reagan] The Globe and Mail flagged that,
[Reagan] without directly naming the president.
[Rush Lindell] With diplomatic dissemination.
[Reagan] Maximum polite.
[Reagan] Anyway,
[Reagan] the joke writes itself:
[Reagan] You want peacetime rates,
[Reagan] end the war.
[Rush Lindell] And that's the part that's actually not funny.
[Rush Lindell] The contradiction is real:
[Rush Lindell] War can't cut because the conditions Trump created won't allow it,
[Rush Lindell] which is exactly where we're heading into July.
[Reagan] The next FOMC meeting,
[Reagan] and that one's going to matter a lot more than this one did.
[Reagan] So here's what's waiting for Warsh on July twenty ninth,
[Reagan] the next FOMC meeting,
[Reagan] and the Strait situation just got messier:
[Reagan] Iran's Revolutionary Guard struck a cargo ship last Thursday; the IMO paused its evacuation convoy; Trump said,
[Reagan] and I'm quoting,
[Reagan] "You're gonna find out," when asked about consequences; that's the geopolitical backdrop Warsh walks into.
[Rush Lindell] And the market is already pricing that in.
[Rush Lindell] CME FedWatch as of today has roughly seven.
[Rush Lindell] Seventy per cent holding in July,
[Rush Lindell] but the hike probability by October,
[Rush Lindell] that number keeps moving in the wrong direction.
[Reagan] Right,
[Reagan] so think about the trap:
[Reagan] Warsh hikes,
[Reagan] Trump blames the Fed; Warsh holds and inflation stays hot,
[Reagan] Trump blames the Fed; the only exit ramp is if Hormuz fully stabilizes fast enough for let energy prices to fall on their own.
[Rush Lindell] And there's an honest case for that.
[Rush Lindell] Core inflation was two point nine per cent in May.
[Rush Lindell] Hey,
[Rush Lindell] the underlying economy isn't running hot,
[Rush Lindell] it's the oil shock that's doing the damage.
[Rush Lindell] If the MOU holds and shipping resumes,
[Rush Lindell] that dynamic could shift before September.
[Reagan] Except Iran shot a cargo ship last Thursday.
[Rush Lindell] I know, I know, I'm steel manning it.
[Reagan] Steal away.
[Reagan] But Reagan,
[Reagan] every piece of the resolution is outside the Fed's control.
[Reagan] The MOU language,
[Reagan] per reporting from Time,
[Reagan] is ambiguous enough that Iran can strike.
[Reagan] strike and still claim compliance.
[Rush Lindell] That's the real problem:
[Rush Lindell] Warsh is making monetary policy decisions about an inflation shock he didn't cause,
[Rush Lindell] can't control,
[Rush Lindell] and can't fix.
[Rush Lindell] The Fed's only lever is demand; it can't reopen the Strait.
[Reagan] And that is the whole episode in one sentence.
[Reagan] Trump started a war that broke oil markets,
[Reagan] inflation followed,
[Reagan] and now the guy Trump put in charge of the Fed gets to own the consequences.
[Reagan] The July twenty-ninth meeting won't just test monetary policy.
[Reagan] It tests whether the relationship survives contact with what actually happened.
[Rush Lindell] The economics don't care who's in the chair.
[Reagan] No,
[Reagan] they don't. And that's the problem nobody in the White House wants to say out loud.
[Reagan] And that is where we leave it.
[Reagan] Warsh walked into his first FOMC meeting holding a trap he didn't build,
[Reagan] and now he's got until July twenty-ninth to figure out how to get out of it.
[Rush Lindell] The dot plot reversal said it all:
[Rush Lindell] nine of eighteen officials projecting a hike.
[Rush Lindell] That's not a hold,
[Rush Lindell] that's a warning.
[Reagan] And Trump called rates coming down very quickly same day—both things.
[Rush Lindell] The cease fire is fragile; the IRGC cargo ship attack just happened,
[Rush Lindell] there's no clean path here.
[Reagan] None,
[Reagan] and that's the story-a political trap built by the same administration that needed worse to succeed.
[Rush Lindell] Thanks for spending the hour with us.
[Reagan] If this episode got you thinking,
[Reagan] share it with someone who needs to hear it.
[Reagan] Subscribe,
[Reagan] leave us a five star review.
[Reagan] It matters more than you know.
[Rush Lindell] New episodes every weekday.
[Rush Lindell] We'll see you back here tomorrow.
[Reagan] Stay sharp!
[Speaker 4] S