If you’ve elected to read this post on purpose, you’re nerdier than I gave you credit for (high praise coming from me). If you’ve stumbled here by some other twist of fate, you’re likely wondering who the hell Kevin Warsh is, and I imagine you’re not alone.

Kevin Warsh is the newly confirmed chair of the Board of Governors of the US Federal Reserve System. Among other duties, he is tasked with leading the Federal Open Market Committee (FOMC) which sets the target range for the federal funds rate. The federal funds rate is then baked into interest rates around the American economy from small business loans to mortgages to yields on savings accounts.

To answer the title of the post directly: I have no idea. Allegedly he slung kegs as a summer job as a high schooler in Upstate New York, but he has not gone on the record about his beverage preferences. And since I’m an economist, not an investigative reporter, I’ll leave that to speculation and instead try to tease out what his Chairmanship could mean for craft brewers.

We’re exactly fourteen days into Warsh’s four-year term, so let’s try to read some central bank tea leaves, shall we? Here are some areas to watch.

Central Bank Independence

Warsh’s Senate confirmation hearing was spicy (as many are these days), with more references to “sock puppets” than you might predict in the upper chamber of Congress. The concern raised by critics was that a Fed chair who would bow to the whims of a President would remove global faith in the independence of the US central bank.

The FOMC has a dual mandate in setting its monetary policy of pursuing low inflation and high employment. Any deviation from that mandate would have significant negative impacts. If the Fed set a low target rate for the political gain of the sitting party, Americans might experience lower interest rates in the short term, but would expect sizeable inflation hot on its tail.

Taken further, politically-motivated monetary policy decisions could lead to the severe devaluation of the dollar as global markets switch to a more trusted currency. Also, bond yields would need to rise to convince buyers to invest in treasuries, leading to a further ballooning of the national debt.

Prediction: Warsh will continue the long history of Fed independence. A short-term favor to the President would not be worth the potential disastrous consequences. Plus, Warsh is just one of twelve voting members of the FOMC, so he couldn’t do it alone.

Communication

Historically, the Fed has hinted well enough about its intended direction for the target rate that any changes are often already baked into the economy by the time the announcement is made. This has helped spread any ripples from changes out over time, so that those changes are felt less by businesses, consumers, and investors.

Warsh indicated during his confirmation hearings that he expects to roll back much of the communication that has taken place in the past. He has said that the Fed will offer fewer press conferences and give fewer speeches that indicate the direction of monetary policy moves ahead of time.

Prediction: The higher level of uncertainty will lead to more sudden swings in interest rates across the economy. For brewers, this could mean markedly different terms offered from one day to the next. In a world with a whole lot of uncertainty already, this move by the Fed would heap on more.

Metric Shift

Despite what this section title might imply, there’s no evidence that Warsh has any desire (or authority) to shift the US to the metric system (sorry for any dashed hopes). Instead, it points to the fact that he is going to be looking at different economic benchmarks than previous Fed chairs, particularly around inflation.

Without getting too deep into it, the Fed under previous chair Jerome Powell would look at the Consumer Price Index and the Personal Consumption Expenditures Index, the latter being its preferred method for assessing inflation. Warsh has expressed discontent with both those metrics, and doesn’t believe they should carry as much weight in Fed decision-making.

Prediction: Whether the shift is founded or not (a discussion for a taproom full of PhD economists), the change would mean moving some of the goal posts that have enabled markets to anticipate Fed moves in the past. This would lead to more… say it with me here… uncertainty.

The Takeaway

It is unlikely that Kevin Warsh’s term as Fed chair will lead to any conditions that are materially worse for US craft breweries. There is always a transition period between Fed leaders and the market has a history of being quite effective at using new patterns to predict future actions.

The most significant way Warsh could prove me wrong is by disrupting global faith in Fed independence. But again, despite the lofty title, he’s just one of twelve votes on the FOMC. Plus, his predecessor (Powell) is notably hanging around as one of the other voting members, presumably to help with continued faith in the system. Plus, it would just be a generally really bad idea and the optimist in me thinks he knows better.

At the end of the day, the decisions of the Fed always impact brewers. Lower interest rates can help with refinancing debt, new loan terms, and investments in materials and equipment. The balance is ensuring inflation doesn’t get out of control to the point where consumers are unwilling to spend on beer.