Economy
Warsh’s debut Fed briefing may reveal his inflation, rates strategy
Over the past few years, new Federal Reserve (Fed) Chair Kevin Warsh has repeatedly addressed the U.S. central bank’s balance sheet, called for more restraint in communicating about interest rates and maintained that it should not venture into matters like climate change.
A Fed press conference on Wednesday, though, will mark his first substantive comments from the chair’s perch about what’s happening with inflation, unemployment and the economic outlook as he makes a rhetorical turn from the abstract words of a policy analyst to the concrete, potentially market-moving words of the world’s most important central banker.
Inflation, in particular, seems stuck more than a percentage point above the Fed’s 2% target, and Warsh’s characterization about whether and when it is likely to fall will be a key first step in the evolution of monetary policy under his leadership.
It’s one that investors will take as a cue about the likelihood of higher rates that many now see coming this year.
What might have been otherwise temporary price shocks, triggered by the Trump administration’s import tariff hikes and elevated oil prices due to the U.S.-backed war with Iran, now threaten a more persistent inflation problem. Meanwhile, the U.S. labor market is close to full employment, hiring has rebounded, and Warsh’s colleagues in the Fed’s regional districts hinted in a recent report at building wage pressures.
The press conference immediately following the end of the Fed’s June 16-17 policy meeting will provide Warsh an opportunity to address those economic cross-currents as he builds a narrative about the risks he sees facing the central bank and how he plans to frame its response.
Warsh, who succeeded former Fed chief Jerome Powell about a month ago, “has been much more vocal in terms of the balance sheet, he’s been much more vocal on communication strategy. When it comes to what’s your theory of change for inflation, what’s your view in terms of the current posture of monetary policy, those things are a big black box that we’re going to start to open up,” Ed Al-Hussainy, portfolio manager for fixed income and macro at Columbia Threadneedle, told reporters last week.
There will be much to unpack: Warsh’s assessment of the impact of tariffs on goods prices; whether the recent oil price shock will persist and spread; whether, as recent data suggest, the improvement in inflation that had been coming from slowing rent prices has run its course.
Those are the sorts of issues Powell, who remains on the Fed’s Board of Governors, would address directly in his press conferences. Warsh has said he doesn’t want to provide too much information about the central bank’s likely next interest rate moves. But where he draws the line between “forward guidance” and offering his outlook for the economy or inflation will be an important aspect of his opening press conference.
“I think Warsh is going to punt on the question” of where inflation is heading and what the Fed might need to do about it, said Christopher Hodge, chief U.S. economist at Natixis CIB Americas, who still expects the central bank to cut interest rates rather than raise them, though the timing remains uncertain. Despite a “neutral-to-hawkish tone,” Hodge said, “I don’t think he will preclude cuts, but the onus will be on the data to prove that the energy shock is past us.”
Avoiding ‘bad look’
The Fed is widely expected on Wednesday to hold its benchmark interest rate steady in the 3.50%-3.75% range, where it’s been since December. In addition to a policy statement, it will also issue updated quarterly economic projections from its policymakers. Warsh’s press conference will begin shortly after.
The new Fed chief dislikes some of the central bank’s current communications tools, including the projections and accompanying “dot-plot” chart of rate expectations, but would need broad consensus among his 18 fellow policymakers before eliminating or changing it.
Warsh is not obligated to submit projections of his own, and doing so might reveal him to be more aligned with the central bank’s mainstream monetary policy thinking than former Fed Governor Stephen Miran, who was a defender of the sharp rate cuts called for by President Donald Trump during his brief stay on the Fed’s board. Miran’s low-hanging dot will now disappear.
More significant is whether the Fed drops policy statement language indicating its next rate move is likely to be a cut in favor of more neutral wording opening the door to a possible hike. Three policymakers dissented in favor of such a shift at the April 28-29 meeting. Others, including influential Fed Governor Christopher Waller, have since said they now support the move after a recent jump in hiring eased their concerns about the labor market’s health. The change would also align with Warsh’s preference to offer less forward guidance.
Warsh faces a possible communications challenge if, for example, the Fed’s policy statement adopts a more neutral tone while the dot-plot chart shows many of its policymakers expect rate hikes by the end of the year.
The median policymaker projection is expected to show the Fed on hold through 2026, moving away from the quarter-percentage-point rate cut policymakers had anticipated in their previous two outlooks as a continuation of an easing cycle that began in 2024 when inflation seemed on track to fall to the 2% target.
Yet if, as expected, the median outlook on inflation is also marked higher without an anticipated rate hike, it will raise questions about whether the Warsh-led Fed is at risk of making the same mistake as under Powell in regarding the forces driving prices higher as temporary and likely to fade without higher borrowing costs. Indeed, the policy rules that Warsh called “aspirational” tools while at Stanford University’s Hoover Institution now almost universally suggest rates should rise.
Warsh, in the run-up to his nomination for the top Fed job by Trump, sketched out ideas about why inflation, and therefore rates, could fall, from the impact of his plans to lower the Fed’s $6.71 trillion balance sheet to productivity improvements from the artificial intelligence boom. He has also suggested inflation may be mismeasured and be running lower than reported.
How much he leans on those ideas to caution about rate hikes will offer a first glimpse of his approach as the Fed’s leader, and whether it seems to differ all that much despite his sharp criticism of its recent decision-making process.
“It’s a bad look for the Fed to say inflation is much too high, but we are going to ignore it because if you exclude these five things it will go away,” said William English, former head of the Fed’s monetary affairs division and now a professor at the Yale School of Management. “He does not want to get too far in front of that.”
Ukraine has sent Russia an offer suggesting they both halt attacks on civilian targets in the Black Sea, a report said Thursday, after mounting strikes on vessels and ports there raised fears over global food supplies.
The offer to suspend attacks was transmitted by Kyiv via a third party, and Ukraine was still waiting for a response, Reuters said, citing a source who is familiar with the matter.
Both Russia and Ukraine, major players in the world agriculture market, have accused each other of intensified attacks on vessels used for exports.
Eu wheat pares gains after report
Kyiv was forced to turn to alternative shipment routes when many shipowners halted stops at ports in late July in the southern region of Odesa – a key hub for grain exports – wary after Russian strikes on dozens of ships.
For its part, Russia had to suspend operations at all three terminals at its Black Sea port of Novorossiysk on Wednesday and Thursday after a Ukrainian attack, and will have to cut its grain exports further.
Before the report, Deputy Russian Foreign Minister Alexander Grushko said Moscow had received no formal Black Sea cease-fire proposal.
“Recently, we have been hearing many calls for various kinds of moratoriums and truces. These ideas are being put forward through various channels, but we have not received any formal proposals,” he said, according to Russia’s state news agency TASS.
Euronext wheat pared gains in choppy trading on Thursday to come off a two-week high following the report.
Ukraine grain exports tumble
Russia has repeatedly aimed to block Ukrainian port operations and shipments that are key to Kyiv’s war-ravaged economy.
In the wake of Russia’s 2022 invasion, the United Nations and Türkiye brokered a deal allowing Ukrainian grain exports to continue to stave off a looming food crisis. In 2023, Russia refused to prolong the agreement.
After that, Ukraine established another sea route that had remained operational until the latest round of escalation. Alternatives – both rail and via the Danube – are extremely limited, Kyiv says.
On Sunday, Türkiye conveyed its concerns about attacks to Russia and Ukraine, saying both should declare a moratorium on attacks in the Black Sea.
The current de facto blockade of Black Sea ports has sent Ukrainian grain exports tumbling 76% year-over-year so far in August, with the agricultural sector warning of vast consequences for the economy should it persist.
Romania shut down its only nuclear plant Thursday, in a rare move due to drought that has caused the Danube river, whose waters cool the plant, to fall to record lows.
Much of Europe is facing a new summer heatwave amid a drought that has driven rivers to historic lows.
The Cernavoda plant, which usually generates a fifth of Romania’s electricity, has been shut down just once before, in 2003, also due to drought.
The Nuclearelectrica company had already shut one of the plant’s two 700 megawatt (MW) reactors last month, and announced Thursday that it needed to shut the second “due to the significant and ongoing drop in the water level of the River Danube.”
“We do not foresee a restart within the next 10 days,” plant director, Romeo Urjan, told Agence France-Presse (AFP).
Efforts to divert Danube flow
To avert a complete shutdown of the reactors, the nuclear company had budgeted more than two million euros ($2.3 million) to divert the Danube’s flow to maintain the cooling of the reactors, including blowing up a rock and sinking four barges filled with rocks into the river.
Alternative power sources, including wind power as well as electricity imports, are expected to ensure adequate supplies, the Energy Ministry said Wednesday.
But it also reiterated an appeal for “responsible consumption.”
It has warned that as a last resort, large industrial users would have to face restrictions in the evening hours to save electricity.
In early August, the government said carmakers Dacia and Ford would pause production in the country until Aug. 19 to help with the power deficit.
Record-low flows
Nearly two-thirds of the Danube has seen flow rates that are the lowest on record for a month of July in 34 years, according to an analysis published Monday by the European climate change observatory Copernicus.
The drought has hit nuclear power providers across Europe.
France, which uses nuclear power to generate around 70% of its electricity, recorded a more than 20% shortfall in atomic production capacity this week, a record deficit caused by outages linked to drought, extreme heat and a jellyfish invasion, according to AFP calculations based on EDF data.
In total, 13 of the 57 reactors in EDF’s nuclear fleet were affected.
The drought in Europe has been exacerbated by human-induced climate change, according to the World Weather Attribution group of scientists, who warn that the problem will worsen.
Hungary races to keep its only nuclear plant online
Hungary, neighboring Romania, has avoided a complete shutdown of its only nuclear plant, Paks, whose four reactors are also cooled by the Danube. Only two of eight turbines at the plant are still working.
Nine days ago, Paks was on the verge of being completely shut down. The continued operation of the last turbine hinged on just a few millimeters of fluctuation in the Danube’s water level.
But with the river expected to drop further, Hungarian Prime Minister Peter Magyar said Wednesday that the government had ordered the construction of a submerged wall, or weir, to try to control flows near the plant.
Two 80-meter (260 feet) barges are also being stationed at Paks that could be sunk to raise the water level.
According to Magyar, Hungarian soldiers were working around the clock on the construction, which should be completed in the next four weeks. This is expected to raise the Danube’s water level by 1.2 meters in front of the cooling system of the plant.
The prime minister estimated the cost at 6 billion forints ($19 million).
The low levels of the Danube, Europe’s second-longest river, have also severely impacted shipping along its 2,850-kilometer (1,770-mile) route stretching from western Germany to its mouth on the Black Sea.
Türkiye plans to launch its lunar spacecraft, equipped with a domestically developed hybrid propulsion system, in the first months of 2027, the country’s industry and technology minister said Thursday.
Mehmet Fatih Kacır said Türkiye had finalized its launch schedule for the Moon mission and that the lunar spacecraft’s homegrown hybrid propulsion system had completed all testing phases.
“We will have achieved and brought to life a technological capability that very few countries in the world are capable of accomplishing,” he told reporters in the western province of Afyonkarahisar.
The minister said space infrastructure has become a strategic pillar of Türkiye’s defense capabilities, pointing to recent achievements in satellite projects including Türksat 6A, Imece, Bilsat, Rasat and Göktürk-2.
Türkiye is also working to secure independent and cost-effective access to space through the construction of its own equatorial spaceport in Somalia.
Kacır said the port is intended to eventually support launches of domestically developed satellites and spacecraft.
“We’re reaching the point where these efforts will enable Türkiye to produce rockets capable of launching our own satellites into space entirely through our own means,” he noted.
“Equatorial regions offer the opportunity to access space through more cost-effective means, taking advantage of the Earth’s rotational speed,” he added.
Kacır said these advances were supported by a growing domestic space ecosystem and that a planned space technopark at Middle East Technical University (METU) would bring together institutions and companies to conduct research and development activities.
Beyond its plans for independent launch capabilities, Türkiye is preparing to sign international cooperation agreements to develop and manufacture components for new space stations and is seeking to participate in additional crewed space science missions, he added.
Türkiye is set to host the 77th International Astronautical Congress (IAC) from Oct. 5-9. The event in the southern province of Antalya is expected to bring together about 10,000 participants from more than 100 countries.
Kacır said the event had already broken previous records for pre-registration and paper submissions and was poised to become one of the largest scientific gatherings ever held in Türkiye.
The congress will include a section dedicated to next-generation space startups, highlighting the role of emerging ventures alongside established companies.
A meeting of parliamentarians and government representatives will also culminate in the Antalya Declaration, which is expected to emphasize peace, security and stability amid global geopolitical divisions.
Global success in exporting domestically built drones has propelled top executives of Türkiye’s defense and tech giant Baykar onto the top of the list of highest individual taxpayers in the country for the fifth consecutive year.
The Turkish Revenue Administration (GIB) announced on Thursday its list of the 100 taxpayers who declared the highest amounts of tax nationwide, following its assessment of annual income and corporate tax returns for the 2025 tax year.
Accordingly, Selçuk Bayraktar, the chairperson of Baykar’s board of directors, and Haluk Bayraktar, Baykar’s CEO, were Türkiye’s highest individual income-tax payers for five consecutive years from 2021 through 2025.
For the 2025 tax year, Selçuk Bayraktar declared TL 2.99 billion ($63 million) in income tax, while Haluk Bayraktar declared TL 2.5 billion. Together, the two executives paid around TL 5.5 billion in income tax.
The taxes were paid following corporate income tax and withholding tax on profit distributions calculated on Baykar’s earnings from the previous year. The roughly 18-fold increase in the amount of tax paid by Baykar’s executives since 2021 was driven largely by the company’s export-focused growth model.
Since its establishment, Baykar has carried out all of its projects using its own resources and continues to operate without receiving cash incentives, grants, or purchase guarantees from the government. The company also says that, from its establishment to the present, it has financed its R&D and production processes by reinvesting its earnings, without even using bank loans.
Looking toward new areas of advanced technology, including space technologies, the company has generated approximately 90% of its total revenue from exports since beginning its R&D activities in 2003.
New export record of $2.2 billion
Baykar, which has been the leading exporter in Türkiye’s defense and aerospace sector for the past five years, has signed supply agreements with 39 countries in total, 36 countries for the Bayraktar TB2 drones and 16 countries for its Bayraktar Akıncı.
The company increased its exports from $664 million in 2021 to $1.2 billion in 2022, and then to $1.8 billion in both 2023 and 2024. In 2025, exports reached a new record of $2.2 billion.
With 90% of its revenue coming from exports, Baykar remained among the top 10 companies in Türkiye across all sectors by export volume for the third consecutive year, while further strengthening its leadership in the global armed-drone market.
Continuing to invest in highly skilled, technology-focused personnel, the company employs more than 8,500 people through its domestic and international subsidiaries.
Top 10 list
Rahmi Koç, honorary chair of Koç Holding, ranked third on the list of taxpayers declaring the income tax of nearly TL 831 million in 2025.
Mehmet Sinan Tara ranked fourth, with TL 676.3 million.
The individuals ranked fifth, sixth, and eighth on the list did not wish to have their names disclosed.
Erman Ilıcak ranked seventh with TL 557.7 million, Mehmet Cengiz ranked ninth with TL 448.7 million and Ceyda Lale Tara ranked 10th with TL 430.3 million.
Among the 100 taxpayers with the highest assessed income taxes, Istanbul ranked first with 78 individuals. It was followed by Ankara and Izmir.
A total of 78 taxpayers on the list chose not to have their names disclosed.
Turkish central bank lifted its inflation forecast for the end of 2026 to 28% but left its interim inflation target for the same period unchanged at 24%, while pledging to maintain a tight monetary stance, its chief said on Thursday.
Presenting the quarterly inflation report in Istanbul, Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan also said that the bank kept its interim inflation target for end-2027 steady at 15% and the interim target for end-2028 stayed at 9%.
“The CBRT will ensure the tightness required by the projected disinflation path in line with the interim targets,” Karahan said.
The bank revised its year-end forecast slightly from the earlier forecast of 26%, in line with market expectations, as it cited mainly developments related to energy prices. It also warned of higher food prices despite an increase in domestic production.
“The outlook for diesel, natural gas and commodity prices excluding energy contributed to the 2-percentage-point revision in the year-end 2026 forecast,” Karahan said.
The bank also incorporated the effects of changes to the fuel-price adjustment mechanism, higher food inflation assumptions and administered prices into its projections.
Türkiye’s annual consumer inflation stood at 31.75% in July, while annual inflation excluding energy and food remained slightly below 30%.
Karahan said the disinflation process had recently lost some momentum because of supply-side pressures stemming from geopolitical developments, but tight monetary policy was visibly restraining domestic demand.
“We observe a clearer slowdown in inflation in categories most directly affected by monetary policy,” he said.
Last month, the central bank left its key interest rate at 37%, as expected, keeping borrowing costs unchanged for a fourth consecutive meeting as it monitors the inflationary impact of the Iran war.
Energy, food prices
Among his remarks, Karahan pointed to improvement in the services side, including in categories that last year weighed more on the inflation outlook, such as rent and education, but instead flagged food prices and energy developments.
“The initial effects of geopolitical shocks on inflation were visible primarily through sub-categories with strong links to energy and petrochemicals,” he asserted.
“Accordingly, we witnessed stronger figures in energy and core goods inflation in the second quarter, which abated somewhat in July,” he further said.
Rising oil and gas prices following Strait of Hormuz disruptions have impacted energy-importing countries, including Türkiye, although authorities have moved to introduce measures such as a slide-scaling system to curb the increase in prices on consumers.
“Another notable factor in recent inflation developments has been food prices,” Karahan said.
The first crop production forecasts for 2026 suggest that production, which decreased amid drought and frost last year, rebounded this year, with fruits and cereals in the lead, he noted.
“This improvement in production exhibits a favorable supply-side outlook for food inflation. However, despite this overall improvement, the negative divergence in food inflation has become more pronounced,” the governor said.
Moreover, despite an overall better outlook in the services category, Karahan suggested that they see “a different course” in transport and communication services.
“Due to the rise in fuel prices, transport services posted strong price hikes in the first seven months,” he added.
Demand slowing down
Among others, Karahan also said domestic demand remained at disinflationary levels in the second quarter, with card spending and trend-adjusted retail sales indicating a continued loss of momentum.
“Thanks to our tight monetary policy stance, the weakening in domestic demand has become more pronounced,” said Karahan.
On the broader economic picture, he pointed out that Türkiye’s trade deficit narrowed in the second quarter from the first as exports increased and imports excluding gold and energy declined.
Furthermore, he indicated that the country’s gross foreign exchange reserves rose by $30 billion from March 27 to reach $185 billion as of Aug. 12, while net reserves excluding swaps increased by $35 billion to $56 billion.
Answering questions from journalists and economists, he also lauded the increase in the Turkish lira deposits, describing it as “a success.”
He also flagged supply-side shocks and emphasized there were many external shocks in recent years, while underlining the importance of tight monetary policy in this regard.
“Without tight monetary policy, we would have seen even higher levels (of inflation),” he said.
“The tight monetary policy stance will be decisively maintained until price stability is achieved in line with our interim targets,” the governor said.
Türkiye’s current account posted a smaller-than-expected deficit of $4.19 billion (TL 200.18 billion) in June, remaining below market expectations of around $5 billion, according to official data released by the Turkish central bank on Thursday.
Commenting on the data, Treasury and Finance Minister Mehmet Şimşek said that the deficit is expected to remain “at sustainable levels,” despite pressures related to energy and commodity prices.
The current account excluding gold and energy recorded a surplus of $1.46 billion during the month, the data from the Central Bank of the Republic of Türkiye (CBRT) showed.
The goods balance posted a deficit of $8.53 billion, while the services balance registered a net surplus of $6.85 billion.
Net revenues from travel services totaled $4.86 billion, while transportation services generated a surplus of $2.6 billion.
On an annualized basis, the current account deficit stood at $38.9 billion as of June. The 12-month goods deficit reached $76.5 billion, while services recorded a net surplus of $63.7 billion.
Primary and secondary income balances posted annualized deficits of $24.2 billion and $2 billion, respectively.
Portfolio investments attract $2.54 billion
Direct investments recorded a net outflow of $899 million in June, as non-residents invested a net $210 million in Türkiye while residents’ assets abroad increased by $1.11 billion.
Residents purchased $248 million worth of real estate abroad, while non-residents made net property purchases of $297 million in Türkiye.
Portfolio investments registered a net inflow of $2.54 billion during the month.
Non-residents made net purchases of $2.92 billion in equities and investment funds and $1.19 billion in government domestic debt securities.
Banks borrowed a net $3.5 billion through loans from abroad, while other sectors recorded net borrowing of $1.8 billion.
Non-resident banks’ deposits at domestic banks decreased by $3.89 billion, including declines of $2.17 billion in Turkish lira accounts and $1.72 billion in foreign currency accounts.
Current account gap expected at 2.3% of GDP
Şimşek, in a statement shared on X, said the current account deficit was expected “to equal approximately 2.3% of gross domestic product (GDP) as of the second quarter.”
Despite pressure from elevated energy and other commodity prices, the deficit is expected to remain at sustainable levels, the minister said.
He described strong access to external financing as an important indication of the confidence built during the government’s economic program.
External debt rollover ratios over the past year reached 161% for the banking sector and 246% for the real sector, he said.
He also noted that the government would “continue implementing productivity- and transformation-focused policies to make improvements in the current account permanent.”
-
Politics2 days agoTürkiye, Bulgaria aim to boost co-op against criminal gangs
-
Economy3 days agoTürkiye’s trade sales volume decreases, retail sales up in June
-
Economy2 days agoEconomic losses from natural disasters drop to $100B in H1: Swiss Re
-
Politics3 days ago‘Terror-free Türkiye model’: Parliament set to pass key law
-
Refugees2 days agoRelief and uncertainty in Turkey’s Kurdish region as militants receive conditional pardon
-
Politics2 days agoPalestinian leader Abbas returns to Türkiye, set to meet Erdoğan
-
Sports2 days agoCristiano Ronaldo ties knot with longtime partner Georgina Rodriguez
-
Refugees2 days agoWhy Trump’s ruse isn’t like other covert presidential trips