Host: A new chair of the U.S. Federal Reserve has been approved. Will the economy also approve? Coming up, we look for answers.

From Thrivent Asset Management, welcome to Advisor’s Market360, a podcast for you, the driven financial advisor.

In a 54–45 vote, the U.S. Senate confirmed Kevin Warsh as the 17th Chair of the U.S. Federal Reserve, or Fed, on May 13, 2026. Nominated by President Donald Trump, Warsh succeeded outgoing Chair Jerome Powell. Warsh is a veteran of the Fed, having served on the Board of Governors from 2006 to 2011, where he played a crucial role in helping Fed Chair Ben Bernanke navigate the 2008 financial crisis. He is a Harvard-educated lawyer and former Wall Street executive.

Many investors are wondering what Warsh’s leadership will look like. Will he favor hawkish or dovish policies? What factors will influence his interest rate thinking? How will he balance economic growth against the risk of inflation? And how will he handle challenges facing the Fed?

To help answer those questions and others, we tapped into the knowledge of two Thrivent Asset Management experts: Steve Lowe, Chief Investment Strategist and Kent White, Head of Fixed Income.

Let's get into it…

During the introduction, we provided a brief overview of Kevin Warsh’s background. We asked Lowe to go a little deeper:

Lowe: He's got a stellar resume. I mean, if you look at him, he — undergrad degree from Stanford, a law degree from Harvard. You know, he spent seven years in New York working for Morgan Stanley. So, he understands The Street. And he was actually very instrumental in the financial crisis of being a go-between the Fed and The Street. Yeah, and he also worked as a Fed governor before. So, I think his background is solid.

Host: White had this add about Warsh’s experience…

White: He went through probably one of the most difficult periods at the Fed with the global financial crisis. He was a governor during that, so going through a crisis like that is very, very valuable experience. He may not have liked how some of the decisions that were made but having been there and gone through that is valuable.

Host: During his Senate nomination hearing, some Senators were worried that Warsh would be too "dovish." This means leaning toward keeping interest rates low to stimulate the economy and maximize employment. We asked Lowe if this was a valid concern:

Lowe: What's kind of surprising, in a way, is he may not be as dovish as people expect, and he may not be as dovish as the President expects.

White also had some thoughts about how dovish Warsh will be:

White: I think the market's gotten comfortable enough with Warsh that he is going to be more independent than what the market was afraid of. He might be leaning a little more dovish at the moment, but I think in general the market has been on board with the new Fed chair.

Host: White just mentioned Warsh may be more independent than originally thought. We asked Lowe why an independent Fed is so important:

Lowe: Because you don't want a central bank setting rates politically because they would always have low rates. And you can look at central banks that are less independent, particularly in emerging markets, they have much higher inflation. There's a very strong correlation between Fed independence and long-term inflation in a country. So, a higher inflation over time is what you get with a less independent central bank.

Host: At any organization, a change in leadership often means changes to the way it goes about its business. The same holds true for the Fed. What changes will Warsh make to how the Fed conducts its business? According to Lowe, one thing Warsh wants to change is the Fed’s balance sheet. He explains…

Lowe: He does talk a lot about wanting to reform the Fed. I don't necessarily think that's a bad thing. It depends on what he does, but the Fed's very much kind of a status quo institution. It changes very slowly, I think.

Host: We asked Lowe to provide an example…

Lowe: The Fed's balance sheet is too large. Its impact on markets is too large. And he wants to shrink it in a measured way. And shift it more to short-term securities than long-term securities, which could impact long-term rates, the higher term premium. But he does not like the inflated balance sheet.

Host: White had this to add about how quickly Warsh plans on making changes to the balance sheet…

White: Yeah, definitely not aggressively taking the balance sheet down. It's still going to be more gradual, but he definitely wants to move a little bit quicker than the current Fed has been doing.

Host: Another area where our experts expect to see changes is in communication style. Warsh seems to prefer a “less is more” approach. White had this to say about Warsh’s communication style:

White: One of the key changes that Warsh has mentioned is that he wants to dial back all Fed communications, not just his own. So, things like, you know, are we going to see the Fed's dot plot anymore? That might be something that goes away. He thinks that the Fed is communicating too much. Whether it's through the dot plot or forward guidance or just too many Fed speakers out on the tape every day talking about what the Fed is doing and what their views are. He may actually— he's talked about maybe going from a press conference with every Fed meeting. We do that eight times a year now. He's talked about going back to just four times a year. So, every other meeting. So, I think we're definitely going to see some changes in Fed communications.

Host: Another thing that Warsh is looking to change is the use of the neutral rate as a policy guide. As a quick reminder, the neutral rate—the interest rate at which monetary policy is neither accommodative nor restrictive—is a theoretical concept that cannot be directly observed, only estimated. Here’s Lowe’s understanding of how Warsh feels about the neutral rate:

Lowe: So, Warsh called it a useful fiction. He does not view it as a dependable policy guide. You know, you can't observe it. And he prefers looking at the economy and kind of broad productivity markers over theoretical formulas. And I think I agree with him that, you know, you never really know where it is until you see it in the economy. So, you don't know what is — neutral, and it's a very kind of theoretical concept anyway.

Host: White agreed with Lowe’s assessment.

White: Targeting the neutral rate has been very difficult because, as Steve mentioned, it's not observable and it's a moving target. So, I think there's a number of people that don't view that as a great policy tool.

Host: Another indicator that Warsh seems poised to change is to use the Trimmed Mean PCE instead of Core Personal Consumption Expenditures, or PCE. While similar, these two indicators have some key differences. The Trimmed Mean PCE is an alternative measure of core inflation that captures underlying inflation trends by removing volatile "outlier" price changes from the raw Personal Consumption Expenditures data. Why is this important to Warsh? White explains…

White: So, the Fed's favorite measure right now is the Core PCE. That's what they've always used as their primary inflation rate that they look at. What the Trimmed Mean does is it takes out like some of the more extreme price moves. Up or down, trims those off, and then you get a little bit better measure of what core looks like, presumably. And over time, it does give you a little bit better view of what inflation is actually doing, underlying inflation. And it's kind of viewed as more of a, a better indicator of where future inflation trends are heading. So that's the measure that Warsh is favoring right now. Like, if you looked at the most recent Trimmed Mean PCE, it was running around 2.3% year over year, where the core PCE is 3%. So, there's a big gap between those two measures when you look at it, and it kind of gives Warsh a little bit more room to make the case for lowering rates.

Host: Warsh has also indicated that productivity, possibly fueled by artificial intelligence, or AI, can help with growth without triggering higher inflation. Here’s Lowe’s take on that…

Lowe: He talks a lot about productivity, in particular, now, about AI increasing productivity and what that does is that, in his view, is it would enable higher growth with less inflation. So, you can run the economy hotter than it was before without doing inflation because when you increase supply significantly, you can have more growth without inflation. I just think he truly believes that you can get higher growth with less inflation via productivity.

Host: White is more dubious about Warsh’s hopes for productivity:

White: Warsh's key views is that he's making the case basically for lower interest rates in the future because of AI productivity gains. And he thinks that AI is going to be very, very disinflationary. So, he's laying the groundwork here for lower rates based on AI productivity. Which we're likely to see, but it's still kind of yet to be seen.

Host: Next we wanted to get our expert’s thoughts on the challenges that Warsh and the Fed will be facing in the near future. Here’s what Lowe will be watching…

Lowe: You watch if inflation expectations become unanchored. In other words, if those go up, you watch the back end of the Treasury curve. Is there a risk premium in there because they think rates are too low and they're going to have high inflation? And I think you watch the board. How does that function? Is there dissent? Is there not? And then I think really, given his views, you watch productivity closely and the impact of AI. Is it actually helping the economy or is it resulting in mass layoffs?

Host: When it comes to the Fed’s positive indicators, or green flags, Lowe will be looking for these.

Lowe: I think one of the most positive green flags is if the president just lets the Fed do what they think they should do and not try to interfere with that. And then, you know, you want to watch productivity, is it actually working like he thinks it is? And Trimmed Mean, is that actually a better tool, a better way of looking at inflation?

Host: In many ways, being the Fed Chair is a thankless job. No matter what decisions you make some people will not be happy. But according to Lowe, Warsh is ready for the challenges ahead.

Lowe: I'm confident that Warsh wants to be successful and wants the Fed to be successful.

Host: Will Warsh’s tenure as Fed Chair be a positive one? That will be for history to decide.

We hope you enjoyed this look at the new Fed Chair. We would like to thank Steve Lowe and Kent White for their insights. What did you think of this episode? Email us at podcast@thriventfunds.com with your feedback or questions for our experts. Want more episodes of Advisors Market360 and other market and investing insights? Visit us at thriventfunds.com, where you can learn how we can partner with you, the driven financial advisor. Bye for now.

All information and representations herein are as of 5/15/2026, unless otherwise noted.

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The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Comments made are not meant to be political in any way. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

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