Politics, not policy, remains the order of the day at the Federal Reserve (Fed) these days. When Kevin Warsh was named the new Fed Chairman, the hope was that the Fed could get back to basics and concentrate on taming inflation while preserving jobs.

Though Warsh said recently at his post-meeting press conference that he is fully committed to the historic Fed mandate, he would not answer reporters’ questions about how he would do it. Or if the rest of the FOMC was on board with his plan. In fact, he never discussed a plan at all on how the Fed is going to be successful, only saying that traditional means of managing policy would no longer be the drivers of his strategy to beat inflation.

But what alchemy could he possibly be considering? The Fed has four ways to implement monetary policy: it can change the Fed Funds rate, it can change the Discount rate, it can buy and sell Treasuries, and it can change bank reserve requirements. Historically, raising rates, selling Treasuries, and raising reserve requirements are restrictive policies aimed at reducing inflation. Lowering rates, lowering the discount rate, buying Treasuries, and reducing reserve requirements are policies that promote growth.

Could he mix and match these levers to produce a hybrid policy? Perhaps. Whispers of yield curve adjustments are making their way through the markets. The rumor is that Warsh is planning to sell longer-term Treasuries, increasing their rates, while lowering the Fed Funds rate. This yield curve steepening strategy would definitely promote economic activity, though it could hamper the housing market. It might also create greater demand for our longer-term Treasuries, allowing the U.S. to lock in borrowing costs. The question is whether this will tame inflation.

Lower short-term rates will spur growth in the economy and especially in markets. Financial assets are fully leveraged on Wall Street, and the term of the financing is rarely more than 90 days. Such a plan to lower rates will help Wall Street carry stock and bond inventory more profitably. It will also continue to spur the stock market rally, which should gain steam from lower corporate borrowing costs. Politically, this makes sense for Trump and the Republicans as the midterm elections approach.

In the future, however, this strategy will not fight inflation. In fact, by having long-term rates go up, this strategy builds in higher long-term inflationary expectations. Jobs will not suffer with this strategy. And the deficit could be funded more cheaply if the Treasury takes advantage and issues more short-term debt relative to longer-term debt.

However, the long-run consequences are not without risk. What happens when the short-term debt needs to be refinanced and the markets defy the Fed and take rates higher despite the Fed strategy? Since the fall of 2024 the Fed has been powerless to control market rates. If the entire curve goes up in yield, then the deficit becomes even more unmanageable, the housing market is crushed, and the inventory of stocks and bonds becomes more expensive to hold. Wall Street will sell them in that case.

Such a scenario will take years to unfold. Trump will be long out of office by then. Warsh will likely be only a one-term Fed Chairman. The problems of debt, rates, and inflation will re-emerge. By then, it will be someone else’s problem: our problem; our kids’ problem. The world’s problem. No need to consider the consequences now. There are mid-terms to win.