In this episode of Thematic Edge, Marvin Barth and Mark Farrington examine whether central banks are finally being forced to confront a changing inflation regime. They argue that policymakers have been too willing to look through supply shocks, too focused on protecting growth, and too slow to respond to rising inflation expectations. The discussion centers on the arrival of Fed Chairman Kevin Warsh and whether his appointment signals a broader shift in central banking philosophy around the world.

Key themes

• Why central banks may have misread the inflationary consequences of the Hormuz shock

• The distinction between market-based inflation expectations and consumer inflation expectations

• Why inflation credibility matters more in temporary supply shocks

• How years of prioritising growth protection may have left central banks behind the curve

• The case for a global regime change in monetary policy

• Whether Kevin Warsh represents a decisive break from the Powell era

• Why markets may be underpricing the risk of Fed rate hikes

• The challenge of restoring credibility after repeated inflation forecasting errors

• How Warsh could reshape the Fed through committee dynamics, communication, staffing and governance

• The tension between Fed independence, politics and inflation control

• Why a simpler, fact based policy statement could force greater accountability within the FOMC

Timestamps

00:00 Introduction and the global central bank backdrop

01:30 The policy response to the Hormuz shock

05:00 Inflation expectations versus market pricing

09:00 How central banks became overly focused on growth risks

10:45 The emerging global monetary policy regime change

14:00 Kevin Warsh and the future direction of the Fed

18:00 Why current policy settings may be too loose

22:00 Why markets are underpricing rate hikes

31:00 How Warsh could change Fed communications

35:00 The case for a fact based FOMC statement

42:00 Groupthink, dissents and institutional reform

48:00 The hidden powers of the Fed Chair

53:00 Governance, staffing and the mechanics of regime change

Further Reading

📖 Warsh cycle, Part I, Thematic Markets, 10 Jun 2026: What to expect from the Warsh Fed in his first few meetings.

📖 Everything you know about QE is wrong, Thematic Markets, 24 Feb 2026: Kevin Warsh’s expected Fed balance-sheet reduction is central to the outlook for U.S. rates, the dollar, and asset prices in 2026–27.

📖 Observations: Goshawks, Thematic Markets, 4 Dec 2025: Implications are a more hawkish Fed than markets expect with a strong focus on reform of the institution, including downsizing the balance sheet and bank deregulation.

📖 Themistocles' lesson for the Fed, Seriously Marvin, 8 May 2026: The Fed’s independence problems are of its own making. Speech given at the Hover Institute’s Monetary Policy conference.

📖 Weighing Warsh, Seriously Marvin, 11 May 2026: Warsh is a hawk, but the real difference is philosophical.

📖 The bank that swallowed a fly, Seriously Marvin, 2 Dec 2025: Why Basel III regulations helped create the Fed's oversized balance sheet and why reformers such as Warsh want to change it.

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