Axel Merk has a read on Kevin Warsh that cuts against the political caricature, and it matters for how investors should think about the rate path now that the Fed has paused its cutting cycle. On a recent Thoughtful Money with Adam Taggart special report, Merk framed the incoming Fed chair nominee as a study in tension: instinctively hawkish, yet sympathetic to a supply-side story that argues for easier policy.
The Hawk Who Might Cut
Merk’s first claim sets the baseline. “He is a hawk at heart, regardless of what Elizabeth Warren is alleging these days,” Merk said of Warsh. That instinct would normally push back when, in Merk’s words, inflation runs “a little bit too high.”
The data lines up with that concern. Core PCE, the Fed’s preferred inflation gauge, hit an index reading of 129.28 in March 2026, sitting in the 92nd percentile of its 12-month range. WTI crude is back near $99.89 a barrel after a spike to $114.58 on April 7, 2026. A pure inflation hawk would not be comfortable here.
Yet Merk thinks the other side wins. “At the other end of the spectrum He is very much in favor of easing rates because of the productivity boom. And so I would think that’s going to prevail,” he said.
The Productivity Case in the Numbers
The supply-side evidence is real. Q1 2026 real GDP grew 2%, with gross private investment up 9% and exports surging 13%, the strongest export print in the dataset. Personal consumption rose just 2%, so demand is not pulling growth higher. That is the textbook profile of capacity expanding faster than spending, which is the productivity-boom case in a nutshell.
The Fed funds target sits at 4%, unchanged since December 11, 2025, after 75 basis points of cuts from the September 2025 peak of 5%. The 10-year Treasury yield is at 4%, and the 10s-2s spread has flattened to 1%, below the 12-month average of 1%. Markets are pricing a Fed that is neither rushing to cut nor signaling another hike.
Oil, Diversification, and the Supply-Side Wrinkle
Merk’s supporting point on energy is worth holding onto. Even if geopolitical tensions ease, “fracking producers remain hesitant to ramp production if they believe price increases are only short-term.” Adam Taggart noted there is “a good-sized cohort that doesn’t trust these prices yet” despite record US output. Merk added a national-security frame: “You don’t want to be fully dependent on the Middle East to get your oil.”
What Investors Should Take Away
Consumer sentiment at 53.3 in March 2026, near recessionary territory, with unemployment steady at 4%, gives a Warsh-led Fed cover to lean dovish if productivity gains hold. The hawk-versus-productivity tension Merk describes is the central puzzle for retirement-focused portfolios positioning into the back half of 2026.
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