Warsh phoned Trump before raising rates to say the committee left him no choice

The only path the Fed has put in writing is the dot plot, and it shows 4.1% at the end of this year and 4.1% at the end of next ^[4]. Subtract one from the other and the Fed's own central projection is no net change over a full year ^[1]. Sedaily reports that few experts are confident of a string of holds, because too many things could still move prices ^[5]. The Fed has delivered a genuine one-off increase once, in March 1997, just before the East Asian financial crisis ^[6].

The cost of following lands fastest in Seoul. Household debt there is past 2,000 trillion won, mortgage rates are above 7%, and interest burdens on small and mid-sized companies are rising ^[8]. One percentage point on the average rate paid across that stock is 20 trillion won of extra interest a year ^[2]. That is about 2.4% of the 821 trillion won budget Korea has set for next year ^[10][3]. Not all of the stock reprices at once, so 20 trillion won is the upper bound on a single year.

Both halves of the governor's position hold at the same time, and a board that declines to follow is choosing to let the currency absorb the gap. Shin Hyun-song said South Korea does not necessarily have to raise rates just because the United States does, while stressing that the biggest factor moving the exchange rate is the rate gap between the two countries ^[9].

The AI build appears in Sedaily's account as one of the things market participants were reading when they concluded the inflation party had to end. Sedaily lists it alongside a Middle East war with no exit, swelling debt in major economies and a weaponized tariff war ^[12]. Warsh made his resolve on inflation unmistakably clear, and the account of his keynote does not report him naming those conditions as his reasons ^[16][4].

The increase could stand alone, as in 1997, and 4.1% could hold through next year. Wall Street is preparing for the alternative, that this is the opening shot of a new tightening cycle aimed at calming long-run inflation ^[7]. A third version, which Sedaily calls the scenario of greatest concern, has fiscal expansion driven by political considerations falling out of step with monetary policy ^[17]. In my view the second is likeliest. Withdrawn guidance plus a pre-emptive phone call are how a chair buys room to go again ^[1][3], and senior central bank officials who knew Warsh before he took office said afterward that he had clearly been a hawk all along and had finally dropped the disguise ^[19]. He is taking care not to follow Arthur Burns, who bowed to Nixon's demands for cuts as Nixon sought reelection and triggered the worst stagflation ^[15]. What would prove the view wrong is the return of calendar language to the statement in the new year. Guidance restored would mean the identical 4.1% dots were meant as a commitment.