Warsh's debut on June 17—declining to publish his own dot plot, shortening the policy statement by 62%, and abandoning forward guidance—was widely interpreted by markets as a clear signal of a hawkish shift. However, Peter Tchir presented a series of arguments suggesting that Warsh's hawkish posture is a carefully designed smokescreen, with the ultimate destination potentially being a rate cut in September followed by another in October, conveniently arriving ahead of the midterm elections. His report develops this thesis through four core arguments.

Political Perspective: Warsh's Hawkishness Is a Performance for the Market

Tchir argues that the Trump administration's policy objectives have never fundamentally changed. Trump has repeatedly stated that, as someone with deep experience in real estate, he understands the importance of low interest rates for the property market. Against this backdrop, Tchir believes it is difficult to imagine Trump being genuinely satisfied with a persistently hawkish Federal Reserve Chair whom he personally nominated.

He describes a hypothetical scenario in which Warsh convinces Trump that sending dovish signals immediately would be disastrous. By appearing hawkish first, three objectives can be achieved: suppress long-term Treasury yields, preserve the appearance of Federal Reserve independence, and push Wall Street analysts and the media toward fully embracing rate-hike expectations. Then, as the economic data gradually "cooperate," the Fed could pivot toward rate cuts under the justification of being "data dependent," while simultaneously attributing the inflation problem to the previous Federal Reserve for using the wrong data and acting too late.

Tchir also adds one detail: Warsh's father-in-law is a major donor to Trump. While this alone does not constitute evidence, Tchir includes it as a background variable within his broader analytical framework.

Data Perspective: PCE Is Not Warsh's Benchmark

Perhaps the most substantive part of Tchir's argument is his systematic criticism of the current inflation measurement framework. He explicitly argues that PCE is more a legacy of the Bernanke era than the preferred inflation gauge of the current Federal Reserve under Warsh.

His criticism is particularly sharp regarding the measurement of housing inflation. Within CPI, Owners' Equivalent Rent (OER) did not peak until mid-2023, reaching approximately 8%. By contrast, Zillow's rental index peaked much earlier—in early 2022—at nearly 16%, before falling sharply. The Cleveland Federal Reserve has developed the New Tenant Repeat Rent (NTRR) Index, whose trend closely mirrors Zillow's data, yet this arguably more realistic measure has received very little attention.

Tchir's conclusion is that the Federal Reserve could justify rate cuts simply by shifting toward inflation measures already developed within the Federal Reserve system itself, thereby creating a legitimate data-driven basis for monetary easing.

Perception Shift One: A New Interpretation of Inflation

Beyond PCE, Tchir also cites real-time inflation data from Truflation. Built using large-scale real-time datasets, Truflation currently estimates core inflation at approximately 1.45%, with readings remaining below 1.8% since February this year.

He also notes that Warsh recently hinted that the "whole number" portion of inflation may matter more than the precise decimal value.

Based on this, Tchir argues that markets may gradually be conditioned to accept inflation in the "2-point-something" range as effectively close enough to the Federal Reserve's target. In his own charts, Tchir labels the inflation target at 2.9%, rather than the traditional 2%. Once the inflation narrative itself changes, the technical obstacles to rate cuts would be substantially reduced.

Perception Shift Two: Reopening the Neutral Rate Debate

Tchir also references previous work by former Federal Reserve insider Miran on the concept of the neutral interest rate. He argues that although almost nobody is discussing the neutral rate today, the topic is likely to re-emerge at the appropriate time.

His reasoning is straightforward: the neutral rate cannot be measured precisely and inherently involves a wide estimation range. If the new Federal Reserve leadership can argue that previous policymakers overestimated the neutral rate, that alone could theoretically justify 50 to 100 basis points of rate cuts.

In other words, the justification for easing would not necessarily require inflation to return fully to target or the economy to fall into recession. Simply revising the framework used to estimate the neutral rate could create room for lower interest rates.

Whether Tchir's argument ultimately proves correct remains impossible to verify today. However, his logical framework is internally consistent. Beginning with the White House's policy incentives, moving through a redefinition of inflation metrics, and culminating in the debate over control of the neutral-rate narrative, every step points toward the same conclusion: Warsh's hawkish stance may not be the destination, but rather the starting point of a much longer strategy.

Tchir is not alone in reaching this conclusion. Robin Brooks, Senior Fellow at the Brookings Institution, has also questioned Warsh's apparent hawkishness, arguing that "last week's FOMC meeting was largely theatrical," and that Warsh "needed to appear hawkish in order to establish distance between himself and the White House."

Andrew Hollenhorst, Chief US Economist at Citi Research, likewise believes that incoming economic data and broader developments increasingly point toward an environment that requires lower—not higher—interest rates.

The next key event will be the release of the June CPI report on July 14. If inflation data begin to align with Tchir's narrative—for example, if housing inflation slows more noticeably or headline inflation comes in below expectations—the market's current pricing of a September rate hike may begin to weaken.