Central Banking 101

Kevin Warsh gave his first big speech as Fed chair today, and the consensus writeup was: he reaffirmed the inflation fight, and Axios’s headline said he “turned to Central Banking 101.” Stocks fell. WSJ called it hawkish. The Economist’s headline was the honest one though: “Kevin Warsh tries being a normal central banker.”

I keep turning that word “tries” over. Somewhere in the last few weeks the market built a working assumption that a Trump-picked Fed chair exists mainly to keep rates low while Bessent runs his bond buybacks and yen interventions and the debt clock ticks past $40 trillion. Warsh was presumably hired into that story. Then he stood up with a 3.7% inflation print in his pocket and did the textbook thing central bankers do, and somehow that read as a betrayal of a plan nobody had actually announced.

That’s the interesting part about institutions. Even a pick made for loyalty gets pulled back toward the gravity of the role once his name is the one on the credibility line, and a genuinely hawkish Fed chair is a lot more useful to a Treasury secretary trying to sell $40 trillion of debt than a compliant one would be, at least until the auctions start going badly. The market priced in a rubber stamp and got a lecture instead.

Smaller, weirder story from the same day: OpenAI cut off Cursor’s model access the moment SpaceX finished buying it. A coding tool built on someone else’s foundation model just learned what every tenant eventually learns. The landlord keeps the keys.