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Economic Commentary

With Warsh at the Fed, Markets Shift Focus to Fiscal Leadership

February 2, 2026 by Jeanette Garretty, Chief Economist

Donald Trump has nominated his new Federal Reserve Chairman, Kevin Warsh.  The choice is largely considered a sensible one, validated by most of Wall Street, global financial markets and other central bankers. Coming on the heels of a Federal Open Market Committee meeting that was notable for its lack of surprises, and for encouraging statements about the US economy, one can sense a collective sigh of relief. At the same time, attention continues to refocus on fiscal policy issues, assisted by the ongoing budget appropriations battle in Congress. It perhaps should not be surprising, given rampant debates about new world orders, that there should be a growing realization that the real economic action of interest is with central governments, not central banks. 

Fed Chairman Powell has taken some pains recently to highlight what monetary tools can and cannot accomplish and which items — long term employment trends, productivity growth, global competition, budget deficits, the value of the dollar, etc.— are the purview of fiscal authorities. Many of these fiscal policy challenges (or opportunities, depending on one’s perspective) remain to be tackled by the United States and other countries around the world and will require strong central government leadership, hopefully guided by high quality data. In the glare of the Fed chairmanship announcement a much-anticipated personnel move by the US federal government was almost blotted out: the appointment of veteran BLS economist Brett Matsumoto as Commissioner of the Bureau of Labor Statistics (BLS). 

Data to Watch 

  1. Institute for Supply Management (ISM) Purchasing Managers Index for Manufacturing in January, released Monday, February 2 
  1. ADP Employment Change for January, released Wednesday, February 4 
  1. Nonfarm Payrolls and Unemployment Rate for January, released Friday, February 6 

Suggested Reading 

  1. The Painstaking Reality of Turning Trump’s Tariffs Into New U.S. Exports 
  1. The AI Bubble Is Getting Closer to Popping 
  1. A Rug Maker Withstood One Year of Trump’s Tariffs. New Challenges Loom 
Disclosures

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