Intel heads into its April 23 earnings with rising investor expectations , but the key question remains whether AI-driven CPU demand can offset ongoing margin weakness . Revenue Stable, But Margins Under Pressure Intel is expected to deliver Q1 revenue around US$12.4 billion , slightly above the midpoint of its guidance range. However, the real concern lies in profitability: Gross margin guided at 34.5% , down from 39.2% a year ago EPS near breakeven (~US$0.00) vs US$0.13 last year This highlights continued pressure from costs, utilisation, and product mix , despite improving demand signals. AI CPUs: A Key Growth Driver Intel’s near-term bullish case centers on AI-related CPU demand , particularly its Xeon processors. A key development is its partnership with Alphabet , which reinforces: Intel’s role in AI data centre infrastructure Growing demand for AI inference and general-purpose computing Investors will watch c...
Kevin Warsh could pursue an unconventional strategy to lower US interest rates, even as most Federal Reserve officials remain cautious due to persistent inflation.
A Two-Pronged Policy Approach
Warsh is expected to argue that shrinking the Federal Reserve’s balance sheet could justify cutting interest rates.
The idea:
- Reduce the Fed’s balance sheet by US$1 trillion
- This acts like a 50 basis-point rate hike (tightening)
- Offset it with a 50 basis-point rate cut (easing)
This effectively means tightening and easing simultaneously, but with the goal of bringing headline interest rates lower.
Why the Balance Sheet Matters
The Fed’s balance sheet — now over US$6 trillion — includes:
- US Treasuries
- Mortgage-backed securities (MBS)
Holding these assets keeps long-term interest rates lower by supporting bond prices.
Reducing the balance sheet would:
- Push yields higher (tightening effect)
- Allow room for rate cuts without overheating the economy
Political Pressure for Lower Rates
Donald Trump has been vocal about wanting lower interest rates, currently at 3.5%–3.75%.
Warsh is seen as aligned with this view, though:
- Most Fed policymakers remain reluctant to cut rates
- Inflation remains above the 2% target, partly due to oil prices and geopolitical tensions
Challenges and Risks
There are significant hurdles to this strategy:
- Selling assets outright could disrupt markets, triggering declines in risk assets
- The Fed typically reduces its balance sheet gradually by letting assets mature
- Banks still demand high reserve levels, limiting how much the balance sheet can shrink
Additionally, markets are sensitive to policy missteps, as seen in past balance-sheet reductions that caused volatility.
Market Implications
If implemented, Warsh’s approach could:
- Lower short-term rates, supporting equities and borrowing
- Keep financial conditions tighter via higher long-term yields
- Create policy complexity, with mixed signals for markets
Investor Takeaways
- Warsh may push for rate cuts by offsetting balance-sheet tightening.
- The strategy aims to lower borrowing costs without fueling inflation.
- Political pressure for rate cuts is increasing, but Fed resistance remains.
- Balance-sheet reduction could tighten liquidity and raise long-term yields.
- Investors should watch Warsh’s confirmation hearing, which may signal future Fed direction.
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