Sep 17, 2026 · 49 min
Hanke sees Warsh steering the Fed toward monetarism
Fed's Warsh Is A MONETARIST Says Steve Hanke, And Here's His Next Move
The argument turns on whether money-supply growth, rather than the federal funds rate alone, will drive the next phase of U.S. monetary policy.
- 1Steve Hanke argues that money-supply growth remains too strong to rule out further Federal Reserve rate hikes.
- 2Persistent deficits and rising Treasury issuance could push yields higher and create a damaging debt-service feedback loop.
- 3Hanke says weak labor-market fundamentals and Europe’s shallow capital markets complicate the broader economic outlook.
Don't miss
Hanke warns that the ten-year Treasury yield could rise further toward a dangerous zone for the economy.
The brief
Steve Hanke argues that Kevin Warsh is moving toward a monetarist framework, where money-supply growth matters more than the federal funds rate alone.
That framework leaves room for more rate hikes: Hanke says policymakers may keep tightening until money growth slows toward a pace consistent with the inflation target.
The fiscal risk is a feedback loop in which persistent deficits, rising interest costs, and new Treasury issuance push yields higher without a fixed economic ceiling.
Hanke separates oil-price shocks from broad inflation, arguing that tighter policy cannot lower oil prices but can stop the shock from spreading through the economy.
The discussion widens to weak labor-market fundamentals, global central banks, Treasury buybacks, and Europe’s underdeveloped capital markets.
The standout forecast is Hanke’s warning that the ten-year Treasury yield could rise further into a dangerous zone despite noisy short-term data.
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