After Walsh said something similar to what he said 15 years ago, a "Fed mouthpiece" broke down history and found that this new leader is not at all a traditional inflation hawk, but rather a structural pessimist obsessed with "supply-side destruction."

Source: Jinshi Data

Currently, Federal Reserve Chairman Walsh's ambiguity regarding the direction of interest rates makes it difficult for global markets to grasp his true views on the economy or inflation. In a context where the U.S. inflation rate has exceeded the 2% target for five consecutive years, the unemployment rate remains low, and the impact of artificial intelligence technology looms, this policy vacuum is exacerbating investor anxiety.

Nick Timiraos, a Wall Street Journal reporter known as a "Fed mouthpiece," recently pointed out that Walsh's silence is not accidental. He has consistently held a strong critical attitude towards the core communication tools—the "dot plot" and economic forecast summary—introduced by the Fed since 2012. In June 2025, he explicitly stated in a private setting: "These forecasts have always been very poor. My dot plot won't be perfect either, so I won't provide one."

Now he has made good on that statement. During his first policy meeting as Fed Chairman in June of this year, Walsh refused to submit any interest rate or economic forecasts. To understand his current decision-making logic, one must trace back to his historical archives from fifteen years ago when he served as a governor at the Fed.

A Structurally Pessimistic Viewpoint from a Supply-Side Perspective

Timiraos pointed out that many on Wall Street celebrated Walsh’s 15 years ago experience, viewing him as a natural inflation hawk. However, the meeting minutes and quarterly forecast data released years later show that his understanding of the causes of inflation is extremely atypical. His logic relies less on traditional demand-side indicators like the unemployment rate and is instead deeply rooted in the supply side and government policy.

At the time of the financial crisis's retreat from 2007 to 2009, the Fed's colleagues generally viewed a high unemployment rate of 9% as an effective way to curb prices through economic idle capacity. Walsh, however, perceived it as permanent structural damage.

He pointed out that capital failed to flow into the most efficient production sectors, the labor market lost its ability to adjust, and Washington's unpredictable policies worsened the situation. If unemployment is structural rather than temporary, it cannot impose constraints on prices.

This divergence is clearly visible in early forecasting records. When the Fed first expanded its economic forecast summary in October 2007, Walsh's views were closely aligned with his colleagues, all predicting relatively low inflation and unemployment rates. However, by January 2009, he had shifted toward the traditional hawkish quadrant.

At that time, Walsh expected the recovery of economic activity to outpace his colleagues' expectations, and price increases to be more severe. He candidly told his colleagues at the meeting: "I still suspect that the risks of deflation are not as high as many other risks." His deeper concern was that if the outside world attributed the crisis to the U.S., "it would be difficult to prevent regions outside the U.S. from adopting poor policies."

By the meeting in January 2011, the U.S. unemployment rate had remained above 9% for a full year. When looking ahead to 2013, Walsh was one of the four decision-makers expecting inflation to reach 2%, but he was also the only official believing that the labor market would still be in a severely poor state by then.

Timiraos stated that in hindsight, Walsh's pessimistic forecasts for economic growth potential were partially validated. As he warned, continuously tightening regulations, fiscal and trade policies became unfavorable for growth, harming the economy's productive capacity. A shrinking economy would reach its capacity limits more quickly, making it more vulnerable to external inflation shocks. However, the inflation crisis he cautioned about arrived a full decade late.

In the nearly ten years after Walsh left the Federal Reserve, price pressures remained quite mild. It wasn't until 2020 that the unemployment rate consistently dropped to 3.5%, far below his or even the most optimistic colleagues' expectations. Only when a global pandemic and an unprecedented wave of stimulus intersected did high inflation truly arrive.

Timiraos summarized that today, the decision-maker Walsh faces a macroeconomic environment completely different from that of years ago. After five years of "overshooting" inflation, he must assess the economic direction amidst a wave of technological shocks that no one can accurately estimate the scale of.

Over the past year, he has suggested that AI-driven technological advances could grant the economy greater growth space and that technology often lowers costs over time.

Last month, when asked how to interpret the current economy, he described the same core issue he faced 15 years ago. Walsh admitted: "We are inferring total supply. We are making judgments about what productivity is."