Warsh’s Jackson Hole speech widens the Fed-Canada rate gap
The tension between the White House and the Fed had already produced one major legal fight this year. In late June, the Supreme Court ruled 5-4 against Trump’s attempt to remove Fed Governor Lisa Cook while her case against him continues. It confirmed that a governor can only be pushed out “for cause,” a bar the justices said needs to be a high one.
The ruling didn’t settle whether Cook can ultimately be removed, but it drew a firmer line around the Fed’s independence than existed before. It landed roughly two months ahead of Warsh’s most closely watched appearance yet at Jackson Hole.
What it means on this side of the border
Recent numbers back up Warsh’s inflation worries. Core PCE came in at 3.3 per cent in June, well above target, and one recent outlook from Franklin Templeton described Warsh’s approach as adding its own layer of uncertainty to markets, with the firm expecting the Fed will eventually need to tighten policy further.
The same outlook noted the Bank of Canada has been easing off its own hawkish tone, which only widens the gap Canadian advisors are already tracking between the two central banks.
The two central banks are on different clocks this fall. The BoC’s next decision lands September 2, with bond markets currently pricing almost no chance of a move either way. The Fed’s own decision follows in mid-September, based on Warsh’s own timeline for the next meeting.
