Jonathan Ingles: Kevin Warsh just chaired his first FOMC meeting. Held rates. Said nothing meaningful about what comes next. And I'd argue that silence is the most consequential thing the Federal Reserve has done in months.
Elena Marsh: You'd argue that even before we get to the actual numbers.
Jonathan Ingles: The numbers make the silence worse. Core PCE — the Fed's own preferred gauge — 3.4% year-over-year. Highest since October 2023. Headline PCE is running at 4.1%, partly because of energy shocks tied to the Iran conflict. And GDP, look, GDP came in at 2.1% annualized, which is the number everyone's going to quote—
Elena Marsh: But consumer spending.
Jonathan Ingles: 0.5%. Revised down. Weakest since Q1 2022. That's the real number.
Elena Marsh: And Wall Street has already flipped. Pricing hikes now, not cuts. That reversal happened fast.
Elena Marsh: Elena Marsh: The thing is — the 2.1% number is doing a lot of work that it shouldn't be doing. Because when you actually open it up, what drove Q1? Trade revisions. AI capital expenditure. Government spending. Not a consumer buying anything on a Tuesday morning.
Jonathan Ingles: Real final sales to private purchasers. Three-year low.
Elena Marsh: Which is — yes. And the way I'd put it to anyone not living inside these numbers: imagine a household where income looks fine on paper because one spouse got a bonus. Except the bonus was a one-time accounting adjustment. And the grocery bill is still going up every week. That's the GDP headline right now.
Jonathan Ingles: That's exactly it. And the St. Louis Fed's own PCE index — ex-food, ex-energy — confirms the inflation is accelerating through May. So the organic economy isn't growing. The measured economy had a good quarter on paper.
Elena Marsh: And that's where Core PCE versus headline PCE actually matters in a real way. Core is what the Federal Reserve watches — it strips food and energy out. Headline is sitting at 4.1%, but that's partly Iran-linked energy shocks that the Fed can't directly touch. Core is 3.4%. That's the number Warsh is actually being held against.
Jonathan Ingles: And a 52-year-old accountant in Columbus doesn't feel core PCE. She feels 4.1% at the pump. The Fed's preferred gauge and lived experience are running in completely different directions right now.
Jonathan Ingles: The bad take that's circulating right now — the one nobody's pushing back on — is that Warsh's silence on forward guidance is discipline. A new chair listening before speaking. That's the framing. And frankly, it's wrong.
Elena Marsh: Mm. Why wrong, specifically?
Jonathan Ingles: Because forward guidance is the primary tool for anchoring expectations and reducing volatility. That's not my opinion — that's what it's for. Warsh goes silent at exactly the moment the FOMC needs to anchor something, and the information vacuum doesn't just sit there. It amplifies. Wall Street pulled back from record highs, tech faltered — that's partly the silence doing work.
Elena Marsh: Well — and I want to test this — what if the silence is honest? What if Warsh genuinely doesn't know which way the data cuts, and telegraphing certainty would be worse?
Jonathan Ingles: Then explain Kashkari. Minneapolis Fed president, on the record, expects a rate hike this year. Consumer spending at a three-year low. Someone is shaping a narrative. Either the FOMC-as-brake argument holds — economists say institutional inertia will slow Warsh down — or Kashkari's hawkishness is real. Those two positions cannot both be true.
Elena Marsh: That's — yeah. That's a genuine contradiction.
Jonathan Ingles: And the Taylor Rule — 3.4% core PCE, an output gap that looks narrower than the headline suggests — that framework isn't even in the public conversation. Meanwhile Trump eases pressure on Warsh the exact week inflation clears 4%. That's not a coincidence. That's a political recalibration, and nobody's naming it.
Elena Marsh: And here's what I can't resolve cleanly. If the Iran ceasefire holds — if oil softens — headline PCE might peak in June or July. Which gives the Fed cover to just... hold. Indefinitely. But if consumer spending doesn't reaccelerate, Warsh is sitting on a genuine dilemma: acknowledge that 2.1% GDP is not what it looks like, or hike into a slowdown and cut later. Neither of those is a good look for a first meeting, and — well — I'm not sure which one he's actually preparing for.
Jonathan Ingles: Whoever figures out Warsh's real position on forward guidance first — on whether he holds, hikes, or just keeps the silence going — that person wins the trade. Equities, bonds, crypto, all three are hanging on the same unknown simultaneously. That's not normal Fed uncertainty.
Elena Marsh: No. It isn't. And that's what I keep not knowing how to answer. Because what about everyone who isn't positioned to find out first?
