—The structure of inflation is changing—and US economic policymaking has not kept up. Fed chair nominee Kevin Warsh will not help.

—Trump-sock-puppet (see * in notes) Warsh … is embracing the disinflationary impulse of AI while ignoring the inflationary impulse of climate change … this is plainly incoherent.

–The Senate Banking Committee voted 13–11 on Wednesday, 29 April 2026, to advance the nomination of Kevin Warsh to the full Senate

Opinion by Mathew Carr

April 29, 2026 (London) — For decades, monetary policy has been the primary tool for stabilising prices.

Central banks adjusted interest rates to manage demand, cool overheated labour markets, and prevent wage–price spirals.

That framework made sense in an economy where inflation was largely driven by domestic demand and wage dynamics.

But that world is fading.

Today’s inflation is increasingly shaped by forces that sit outside the traditional reach of interest rates.

Climate-related shocks disrupt food supply and energy systems.

Geopolitical tensions fragment trade and raise input costs. Demographic shifts and AI distort labour supply in uneven ways.

These are not classic demand-driven pressures.

They are structural, supply-side forces that monetary policy can only bluntly and imperfectly address.

Raising interest rates does not produce more grain during a drought, nor does it stabilise energy markets fractured by conflict or accelerate the build-out of resilient infrastructure.

At best, tighter policy can suppress demand enough to prevent these shocks from feeding into broader, persistent inflation.

But that comes at a cost: slower growth, weaker investment, and unnecessary strain on households and businesses.

In other words, the interest-rate tool still works—but it is increasingly ill-suited to the problem.

This shift places far greater weight on fiscal policy, an area where US politicians have often been inconsistent, reactive, or gridlocked.

If inflation is being driven by structural constraints, then policy must address those constraints directly. That means investing in supply capacity, improving resilience, and reshaping incentives across the economy.

Climate policy is the clearest example.

As extreme weather and energy transitions become central drivers of price volatility, the absence of a coherent carbon pricing framework is no longer just an environmental issue—it is a macroeconomic one.

Without pricing carbon, markets fail to allocate capital efficiently toward low-emission, resilient systems.

The result is a slower, more disorderly climate transition, with higher long-term costs and more frequent supply shocks.

Well-designed carbon pricing would do more than reduce emissions and gather a new stream to government revenue.

It would provide a predictable signal for investment, lower uncertainty, and help stabilise energy markets over time.

Combined with targeted public investment and regulatory reform, it could ease the very supply constraints that are now feeding inflation.

Warsh says worrying about climate change amounts to mission creep. He’s just wrong because chaotic weather stoked by global heating is becoming more influential on markets and is pushing prices for near everything higher.

More broadly, fiscal policy needs to become more strategic and less cyclical.

Instead of relying on central banks to clean up after shocks, governments should be better shaping the conditions that determine how those shocks begin and how they propagate through the economy — eg clean energy. Biden did so some of this with the Inflation Reduction Act.

That could be expanded to include infrastructure, even newer energy systems, housing supply, and labour market flexibility, possibly universal income.

None of this means monetary policy is obsolete.

Central banks will remain essential for anchoring expectations and maintaining financial stability. Yet Warsh is willing to erode expectation setting, too, which is probably misguided if we want to curb market shocks and price volatility.

Warsh embracing the disinflationary impulse of AI while ignoring the inflationary impulse of climate change is plainly incoherent.

Low interest rates are needed to speed climate action because, unlike extractive fossil fuels which can quickly turn a profit, clean energy generally requires huge up-front investment and delayed cash flow.

Monetary policy that helps billionaires by inflating assets cannot be the only game in town—especially in an era where inflation is less about overheating demand and more about constrained supply. (Constrained by OPEC, constrained by fake war.)

The risk is not just ineffective policy, but policy mismatch: using 20th-century tools to solve 21st-century problems.

If US politicians do not step up their fiscal game and evolve the Fed, they will continue to lean on systems to do jobs those institutions were never designed to do—and the economy will pay the price.

Perhaps the Fed, the Whitehouse and Congress do need to collaborate on interest-rate decisions.

Warsh will not help solve this policy modernisation problem because he should be expanding the Fed’s tool box for inflation control. Not shrinking it.

(Updates with today’s ctee meeting result)

Notes

Gemini context unchecked:

• Party Line Split: The vote fell strictly along party lines, with all 13 Republicans in favour and 11 Democrats opposed [1.1.1, 1.1.3].
• Obstacle Removed: The advance was made possible after Senator Thom Tillis (R-N.C.) dropped his weeks-long blockade [1.1.3].
  • Tillis reversed his stance after the Department of Justice closed its criminal investigation into current Fed Chair Jerome Powell and referred the matter to an internal watchdog [1.1.11, 1.2.9].
• Opposition: Democrats, led by Ranking Member Elizabeth Warren, opposed the nomination, citing concerns that Warsh would compromise the Federal Reserve’s independence to satisfy the President’s policy demands [1.1.4, 1.1.9]. 

• Full Senate Vote: The nomination now moves to the Republican-controlled floor for a final confirmation vote [1.2.2, 1.2.4].
• Target Date: Lawmakers aim to confirm Warsh before 15 May 2026, when Jerome Powell’s term as Chair officially expires [1.2.7, 1.3.3]. 

…..

• Senate Confirmation: Warsh recently testified before the Senate Banking Committee on 21 April 2026.
• Key Obstacle Cleared: Senator Thom Tillis, who had blocked the nomination due to a Department of Justice probe into current Chair Jerome Powell, dropped his opposition on 26 April 2026, after the investigation was closed.
• Next Steps: The Senate Banking Committee is expected to advance the nomination to a full Senate vote as of 29 April 2026. 
  Euronews.com +3

• Background: A 56-year-old former Morgan Stanley banker who served as a Fed governor from 2006 to 2011.
• Wealth: Estimated net worth between $131 million and $226 million; he has committed to divesting these assets within 90 days if confirmed.
• Proposed Policy Changes:
  • “Regime Change”: Has called for a fundamental shift in the Fed’s approach to inflation and monetary policy.
  • Balance Sheet: Aims to significantly shrink the Fed’s $6.7 trillion balance sheet.

  • Independence: *Vowed at his hearing that he would “absolutely not” be a “sock puppet” for the president and would maintain the central bank’s independence. 

    BBC +7

• Jerome Powell’s Term: Powell’s term as Chair expires on 15 May 2026.
• Potential Overlap: Although stepping down as Chair, Powell has the option to remain on the Board of Governors until his separate term ends in 2028. 
  Euronews.com +3