What are the key takeaways from this Odd Lots episode?

Key insights include: **Warsh Speech Signals Rate Hikes:** Warsh's Jackson Hole speech contained four sections, with the final section cataloguing persistent inflation risks — services inflation trending upward on 3, 6, and 12-month moving averages in the high threes — without explicitly calling for hikes. Posen reads this as de facto forward guidance toward rate increases in September and December, pushing Fed funds 75–100 basis points higher within six months.; **Fed Discretion Risk:** Warsh consistently reserves maximum last-minute decision-making flexibility across his confirmation hearings, press conferences, and Jackson Hole speech, never pre-committing to specific indicators or speeds of adjustment. Posen frames this as dangerous "pure discretion" — the Greenspan 1999 model — where institutional credibility depends entirely on one person rather than transparent, rules-anchored frameworks that survive leadership changes.; **Communications Committee Likely Most Radical:** The Fed's communications task force, led by former Bank of England Governor Mervyn King and Peter Fisher, is positioned to produce more sweeping recommendations than the balance sheet committee. Both King and Fisher have publicly grown skeptical that central bank forward guidance improves outcomes, arguing excess transparency suppresses market volatility, distorts price signals, and creates moral hazard among investors.

What did Adam Posen discuss on Odd Lots?

Peterson Institute President Adam Posen, recorded at Jackson Hole, evaluates Fed Chair Kevin Warsh's first major speech, assessing its implications for rate hikes, Fed independence, committee dynamics, and the likely overhaul of central bank communications, while also addressing AI's measurable but limited productivity impact so far. Key topics include: **Warsh Speech Signals Rate Hikes:** Warsh's Jackson Hole speech contained four sections, with the final section cataloguing persistent inflation risks — services inflation trending upward on 3, 6, and 12-month moving averages in the high threes — without explicitly calling for hikes. Posen reads this as de facto forward guidance toward rate increases in September and December, pushing Fed funds 75–100 basis points higher within six months.; **Fed Discretion Risk:** Warsh consistently reserves maximum last-minute decision-making flexibility across his confirmation hearings, press conferences, and Jackson Hole speech, never pre-committing to specific indicators or speeds of adjustment. Posen frames this as dangerous "pure discretion" — the Greenspan 1999 model — where institutional credibility depends entirely on one person rather than transparent, rules-anchored frameworks that survive leadership changes..

How long is this episode of Odd Lots?

This episode is 59 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

Odd Lots

Adam Posen Thinks Things Could Get Very 'Messy' for the Fed

September 1, 2026

59 min episode · 2 min read

Adam Posen

Episode

59 min

Read time

2 min

Topics

Productivity, Investing, Fundraising & VC

AI-Generated Summary

Published Sep 1, 2026

Key Takeaways

✓Warsh Speech Signals Rate Hikes: Warsh's Jackson Hole speech contained four sections, with the final section cataloguing persistent inflation risks — services inflation trending upward on 3, 6, and 12-month moving averages in the high threes — without explicitly calling for hikes. Posen reads this as de facto forward guidance toward rate increases in September and December, pushing Fed funds 75–100 basis points higher within six months.
✓Fed Discretion Risk: Warsh consistently reserves maximum last-minute decision-making flexibility across his confirmation hearings, press conferences, and Jackson Hole speech, never pre-committing to specific indicators or speeds of adjustment. Posen frames this as dangerous "pure discretion" — the Greenspan 1999 model — where institutional credibility depends entirely on one person rather than transparent, rules-anchored frameworks that survive leadership changes.
✓Communications Committee Likely Most Radical: The Fed's communications task force, led by former Bank of England Governor Mervyn King and Peter Fisher, is positioned to produce more sweeping recommendations than the balance sheet committee. Both King and Fisher have publicly grown skeptical that central bank forward guidance improves outcomes, arguing excess transparency suppresses market volatility, distorts price signals, and creates moral hazard among investors.
✓Powell Fed Legitimately Got Inflation Wrong: Controlling for energy import dependence, pre-existing inflation levels, and fiscal policy looseness, the US performed worse than the ECB and Swiss National Bank on inflation. The Fed was late to hike in 2022, cut prematurely multiple times in the following year despite dissenting outside voices like Posen, Michael Strain, and Diane Swank warning the labor market would not collapse as Fed staff projected.
✓AI Productivity Gains Visible, Job Displacement Not Yet: Measurable productivity improvements from AI are emerging, but job displacement remains absent in labor data — even among coders, a high-exposure category. Economists Erik Brynjolfsson and Luis Garicano attribute this to a J-curve effect: businesses require roughly five years to restructure operations around new technology before displacement accelerates, mirroring the internet's delayed productivity payoff in the 1990s.

What It Covers

Peterson Institute President Adam Posen, recorded at Jackson Hole, evaluates Fed Chair Kevin Warsh's first major speech, assessing its implications for rate hikes, Fed independence, committee dynamics, and the likely overhaul of central bank communications, while also addressing AI's measurable but limited productivity impact so far.

Key Questions Answered

•Warsh Speech Signals Rate Hikes: Warsh's Jackson Hole speech contained four sections, with the final section cataloguing persistent inflation risks — services inflation trending upward on 3, 6, and 12-month moving averages in the high threes — without explicitly calling for hikes. Posen reads this as de facto forward guidance toward rate increases in September and December, pushing Fed funds 75–100 basis points higher within six months.
•Fed Discretion Risk: Warsh consistently reserves maximum last-minute decision-making flexibility across his confirmation hearings, press conferences, and Jackson Hole speech, never pre-committing to specific indicators or speeds of adjustment. Posen frames this as dangerous "pure discretion" — the Greenspan 1999 model — where institutional credibility depends entirely on one person rather than transparent, rules-anchored frameworks that survive leadership changes.
•Communications Committee Likely Most Radical: The Fed's communications task force, led by former Bank of England Governor Mervyn King and Peter Fisher, is positioned to produce more sweeping recommendations than the balance sheet committee. Both King and Fisher have publicly grown skeptical that central bank forward guidance improves outcomes, arguing excess transparency suppresses market volatility, distorts price signals, and creates moral hazard among investors.
•Powell Fed Legitimately Got Inflation Wrong: Controlling for energy import dependence, pre-existing inflation levels, and fiscal policy looseness, the US performed worse than the ECB and Swiss National Bank on inflation. The Fed was late to hike in 2022, cut prematurely multiple times in the following year despite dissenting outside voices like Posen, Michael Strain, and Diane Swank warning the labor market would not collapse as Fed staff projected.
•AI Productivity Gains Visible, Job Displacement Not Yet: Measurable productivity improvements from AI are emerging, but job displacement remains absent in labor data — even among coders, a high-exposure category. Economists Erik Brynjolfsson and Luis Garicano attribute this to a J-curve effect: businesses require roughly five years to restructure operations around new technology before displacement accelerates, mirroring the internet's delayed productivity payoff in the 1990s.

Notable Moment

Posen revealed an unattributed senior AI industry figure, when pressed on why predicted job losses never materialized, responded that people simply prefer dealing with humans over machines — a conclusion Posen noted any economist could have reached without advanced AI research.

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Episode Transcript

00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. Radio. News. 00:00:09 Speaker 3: Hello and welcome to another episode of the Odd Lots podcast. 00:00:21 Speaker 2: I'm Joe Weisenthal. 00:00:23 Speaker 4: And I'm Tracy Allaway. 00:00:24 Speaker 3: Tracy, another Jackson Hole, another Jackson Hole, another Jackson Hole episode. You know, I think like with central banking and some of these topics... People are pretty polite. You know, it's like sometimes you talk to people, it's a little bit hard to know like what they're really thinking about all these topics. 00:00:40 Speaker 2: What they feel. 00:00:41 Speaker 3: It's hard to, sometimes I do perceive a certain lack of, I don't want to be. 00:00:48 Speaker 4: Let's say people are very diplomatic. 00:00:50 Speaker 3: People are very diplomatic. Thank you for finding the word. 00:00:52 Speaker 4: That's a diplomatic answer to the point that you're making about diplomacy at an official Fed function. 00:00:57 Speaker 3: People are very diplomatic, and I'm pro-diplomacy, but sometimes it's nice to just check in with someone just like, all right, let's. 00:01:04 Speaker 1: Give it to a straight. 00:01:05 Speaker 4: I'm waiting for you to describe our next guest. 00:01:07 Speaker 1: No, I'm saying, all right, I'm just going to jump right into it. 00:01:10 Speaker 3: No, a guest who I believe when we talk to him, I feel like here's someone who's giving it to us straight. who's not as concerned perhaps with like, you know, being overly diplomatic. 00:01:19 Speaker 4: Someone who's not afraid to utter the words fiscal dominance. 00:01:22 Speaker 1: Yeah, someone who's just afraid, someone who just tells it like it is. 00:01:25 Speaker 3: Anyway, very excited to say here in Jackson Hole, back with the perfect guest, someone we've had on the podcast multiple times before, Peterson Institute President Adam Posen, also formerly a member of the Bank of England's Monetary Policy Committee. So Adam, thank you so much for coming back on Odd Lots. 00:01:42 Speaker 2: After that intro, thank you so much. 00:01:44 Speaker 1: You have to really throw some fastballs. 00:01:46 Speaker 2: I don't know whether it's hype or warning. 00:01:48 Speaker 1: You have to throw some fastballs first. But what did you think of... This is the first interview we've done since the speech. 00:01:54 Speaker 2: Yeah. 00:01:55 Speaker 1: So what did you think of Chairman Warsh's speech? 00:01:58 Speaker 2: I mean, even though. 00:02:01 Speaker 1: Okay, there we go. 00:02:02 Speaker 2: No, no, no, no. Even though I knew that was the question that was coming. You know, if you were grading it, it's a B-minus speech. Okay. It's a B- speech by normal standards. It's much more positive because of the situation we were in. He, the chair, well, you know, let's be blunt, as you said. The chair had created a huge amount of not …

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