Ahead of this week’s FOMC meeting, allow me to reiterate my deeply-held view that a lot of very smart people in America remain in denial about where we are as a country.

In my opinion (and the very fact that I’m so assiduous these days about alluding to the First Amendment before exercising the rights it promises says a lot on its own), Kevin Warsh should be viewed no differently than Kevin Hassett or, say, Larry Kudlow when it comes to assessing prima facie credibility.

I’ve explained this before, and it’s self-evident to most of my readership, but on the eve of a policy gathering at which some market participants believe there’s a meaningful chance of Warsh delivering a rate hike not preemptively blessed by The White House, I want to spell it out again.

No one — nobody — who’d accept the position of Fed chair under the current domestic political circumstances in America deserves “the benefit of the doubt.” Just like the rest of us, Warsh witnessed what befell Jerome Powell and Lisa Cook over the last 18 months and also just like the rest of us, he knows the legal proceedings brought or threatened against Powell and Cook were a dangerous farce.

Further, and as expounded at some length here, the notion that comparing Warsh to, say, Pete Hegseth or Howard Lutnick, is apples-to-oranges given that the Fed’s not beholden to Trump in the same way the Pentagon and the Commerce Department are is an exercise in question-begging. Fed independence is the crux of the issue. To take it as a given for the purposes of discussing Warsh’s chairmanship is to assume away the very question being asked.

Moreover, the Supreme Court’s decision to allow Cook to retain her seat on the board wasn’t (was not) an unequivocal statement of judicial support for Fed independence. Setting aside the “small” issue that the decision was split, the court merely ruled that Cook was denied due process.

As the court put it, “At minimum, Cook was entitled to some explanation of the evidence at issue, some avenue for a response and a deadline by which a response would be due.” Brett Kavanaugh, in a somewhat unnerving passage, emphasized that the ruling is only an “interim” measure, and “does not decide whether the president may lawfully remove Governor Cook.”

I went to great effort last year and again last month to emphasize that the ad hoc Fed “carveout” the court’s conservative majority conjured in May of 2025 was little more than an attempt to insure against market blowback in the event the justices ultimately decided to overturn Humphrey’s Executor, the 90-year-old precedent that shielded independent agencies from mercurial presidents inclined to spite. That carveout won’t likely stand up to a serious challenge from a competent, determined solicitor general. You’ve been warned. Again.

Everyone, including and especially Warsh, is fully apprised that the Fed’s under attack from the Oval Office and that the siege is ongoing. Unless you think Warsh took the job specifically to defend the castle, you might worry he’s there to facilitate its surrender.

This point seems less contentious when put as a question: Would second-term Trump choose a Fed chair without receiving assurances of fealty within the relatively narrow confines of what can reasonably be expected from the position if The White House is interested in preserving the bare minimum trappings of indepedent monetary policy? No. The answer’s “no.”

So, will Warsh hike on Wednesday? I doubt it. But if he does, you can be absolutely sure the decision was made in coordination with Scott Bessent, who in turn liaised with Trump.

Consider that 600 words of context for a short note penned by Harley Bassman, of MOVE fame. Bassman’s a good guy. He’s also a smart guy. And a guy who isn’t naive about domestic politics. His take caught my eye on Tuesday because he seems to believe it’s at least possible that Warsh will hike this week of his own accord (i.e., not because Bessent convinced Trump of the merits and Trump blessed the decision).

If you ask Bassman, the best course of action is to deliver the ~50bps of tightening the market’s already pricing for the back-half of the year. In addition to underscoring Warsh’s commitment to corralling inflation and preserving Fed independence, such a move would also provide some much-needed respite for the US long-end.

I agree with Bassman on all points except for the (unspoken) contention that this is actually up to Warsh. Maybe Harley knows it isn’t — isn’t up to Warsh, I mean. Indeed I hope he knows that. Whatever the case, his call for a 50bps hike is well worth a read. I present it below, without further comment.

I have been on record as “higher for longer” against the naysaying Team Transitory for a few years. Thus, I pushed back hard on the late-2025 expectation of three Fed rate cuts.

To my chagrin, I was more right than anticipated, and I now offer that the Fed should hike their rate by 50bps after tomorrow’s meeting.

I will say I can offer no economic support for a 50bps hike, rather I am looking solely at market psychology and politics.

As I detailed in May [of] 2023, I believe forward guidance contributed greatly to the GFC, and the dots have only made it worse. Investors have used such guidance to increase both risk and leverage. The Fed’s March 2021 forward guidance that rates would remain near zero until 2023 is why SVB did not hedge.

Thus, Warsh’s elimination of guidance last month and placing dots on the chopping block is terrific public policy; and a 50bps hike in July would lock in this success.

A 25bps hike is too chicken $hit to match Warsh’s rhetoric, and 75bps implies he knows we have an economic problem, which he does not.

The December 2026 Fed funds futures contract is priced at 4.04%, so the notion of a “market Armageddon” is silly. The market already has the rate right, just not the timing.

A 50bps hike shows there is a new sheriff in town, and he is not beholden to the president. An independent Fed is the cornerstone of the global financial system, smartly confirmed by the recent Supreme Court decision that exempted the Fed from executive branch (presidential) control.

As noted, the market has already priced in 50bps by year end, so why drag its feet; rip the Band-Aid so it’s “one and done” and move on. Likely a back-end rally follows which leads to lower MBS rates, a public policy win.

Will the Fed take my advice… why start now?

But I do want to be on record that there is a path to quickly undoing the bad public policy started in 2013 when a panicked reaction to the “taper tantrum” disrupted cogent monetary policy.

Harley S. Bassman

July 28, 2026