Shrink the balance sheet and cut interest rates.

The market isn't cooperating.

Since his appointment in January, the 10-year yield has risen from 4.3% to 4.6%.

The war with Iran accelerated the movement.

On his first day as chair, Treasuries are already pricing in a completely different environment than he had in mind.

Cutting interest rates with inflation pressured by energy and long-term yields rising is politically risky and technically difficult.

Warsh inherited a Fed with little room for maneuver and a market that had already tested his credibility before he even took office.