A Note Left on the Chair's Desk
The institution that invented forward guidance is about to lose its voice. Here's what the building is thinking.
May 8, 2026 · Monetary Policy
Fifty-two years. That's roughly how long it has been since the Federal Reserve last faced four dissents in a single meeting. October 1992. The Greenspan era, early days. The economy coming out of a shallow recession, the committee fractious about the pace of recovery. It was a different institution in a different country facing a different set of problems. The comparison is instructive not because history rhymes — it doesn't, not cleanly — but because four dissents is a number that means something. It means the center is not holding.
Last Wednesday's April 29th meeting was Jerome Powell's last as chair. He held the fed funds rate at 3.50–3.75%, which everyone expected, which the CME FedWatch priced at 100% probability the morning of. The unanimous part ended there. Three officials voted to strip the statement of any "easing bias" — the coded language signaling that cuts remain on the table. One official, Stephen Miran, dissented the other direction, pushing for an immediate reduction. Four dissents. The most since 1992. Powell stood at the podium and congratulated his successor on clearing the Senate Banking Committee the same afternoon. The central bank of the United States, in the span of a single press conference, buried one era and nervously inaugurated another.
Kevin Warsh takes the chair in June. He is, by training and temperament, a market man. He served on the Board from 2006 to 2011 — he was there for the crisis, which should count for something — and has since spent the intervening years as a fellow at the Hoover Institution, writing op-eds, advising private equity, and nursing views about monetary policy that put him, broadly, in the easier-money camp. In November he published a piece in the Wall Street Journal calling Trump's deregulatory agenda the most significant since Reagan. That was not an accident of phrasing.
The uncomfortable truth about Warsh's situation, which the Natixis economist Christopher Hodge put plainly, is that he may be the least influential Fed chair in decades. The chair controls the agenda. The chair has one vote. And right now the committee has three officials who don't want to signal cuts, one who wants them immediately, and a former chair who has publicly said he's staying on the board until Trump's legal threats against the institution are "well and truly over." This is not a well-oiled consensus machine. This is a governing committee that is also quietly a constitutional standoff.
| Fed funds rate | 3.50–3.75% — held at April 29 meeting |
| April 29 dissents | 4 — most since October 1992 |
| 10-year Treasury (post-meeting) | 4.42% — one-month high |
| CME hike odds by year-end | ~17% hike / 12.6% cut |
| Warsh confirmation | Senate Banking Committee cleared, party-line |
Into this walks the April jobs report, released this morning at 8:30.
Consensus was somewhere between 55,000 and 120,000 depending on who you asked, which is an unusually wide spread and reflects something honest: nobody actually knows what April looks like. The ADP number came in at 109,000 — better than feared, buoyed by education and healthcare, with professional and business services down 8,000. March's headline was 178,000, but that was inflated by strike-return effects in healthcare. The underlying monthly average since January is 68,000. Real average hourly earnings fell 0.6% in March when you adjust for the CPI surge driven by energy. Wage growth of 3.5% annually sounds fine until oil-driven inflation is running above it. Real purchasing power for the average American worker has effectively flatlined.
The Fed knows all of this. The three dissents on the easing bias were not from people who think the economy is strong. They were from people who think inflation is the more urgent variable, that the Iran war has structurally changed the energy price environment in ways that a cut — or even the signal of a cut — would make worse. Alberto Musalem, St. Louis Fed president, said this week that risks have "shifted toward higher inflation," that rates may need to stay on hold "for some time." That is not a man preparing to ease.
Meanwhile Warsh, who will chair his first meeting on June 17th, has spent years arguing for a more aggressive posture on inflation and a more market-sensitive Fed. The specific shape of his views — does he cut because Trump wants him to, or does he tighten because inflation demands it, or does he simply inherit a committee that won't move regardless of what he wants — is genuinely unclear. Senator Elizabeth Warren called him a "sock puppet" during confirmation hearings. His supporters say he'll be independent. Both things might be true at different moments. The mortgage rate swings alone tell the story of how little clarity the market has: the 30-year fixed fell to 6.23% last week after touching 6.46% earlier in the month. Bond traders are not pricing a coherent view. They're pricing confusion.
Here is what the Fed is actually confronting. A labor market that is cooling but not breaking. Inflation that is structurally elevated by a war that has not ended, mediated by an oil price that fell 7% on Wednesday on peace hopes and then rose again Thursday when U.S. destroyers took fire in the Strait of Hormuz. A new chair who inherits four dissenters, a former chair with a board seat and a lawyer, and a White House that has made clear it views the institution as a policy lever. A preliminary benchmark revision that wiped 911,000 jobs from the March 2025 count. Data that is noisier than usual because of a 43-day government shutdown, strike distortions, and war-related sectoral dislocations.
The Fed's credibility rests on one thing: that when it says something about the future, markets believe it. Forward guidance works when the institution is coherent. Four dissents, a leadership transition, a geopolitical price shock, and a White House openly hostile to the institution's independence are not a recipe for coherence. They are a recipe for the kind of muddled, reactive policy-making that defined the 1970s — not because inflation will necessarily spiral, but because the signal-to-noise ratio at the world's most important central bank is the worst it has been in a generation.
The April payrolls number drops this morning. If it's weak enough to revive cut pricing, Musalem and his fellow dissenters will say the inflation picture hasn't changed. If it's strong enough to revive hike bets, Miran will say policy is already too tight. Either way, Powell walks out of the building for the last time as chair having presided over the most operationally fragmented FOMC since the early Greenspan years.
Warsh walks in on June 17th.
The chair controls the agenda. One vote.
Not investment advice*