by Louis Navellier
February 18, 2026
It is becoming increasingly obvious Kevin Warsh was Treasury Secretary Scott Bessent’s top choice to run the Fed, and Warsh has called for a closer relationship between the Fed and Treasury Department, so future yield curve management and open market actions by the Fed will likely be coordinated between these two at the Fed and Treasury. The Treasury yield curve is now the steepest it has been in the past four years, so Treasury Secretary Bessent has successfully fixed the inverted Treasury yield curve he inherited from his predecessor, Janet Yellen. If Warsh is confirmed as the next Fed Chair, Bessent will become an even more influential Treasury Secretary, which will likely mean the Fed will cut rates faster.
The Financial Times says some economists are skeptical of Fed Chair nominee Kevin Warsh’s view of AI being deflationary. Specifically, Warsh said AI will trigger “the most productivity enhancing wave of our lifetimes – past, present and future.” This means Warsh expects AI productivity gains will expand our output and pave the way for the Fed to cut key interest rates without triggering inflation. Naturally, these comments will likely make Warsh’s Senate confirmation hearings much more interesting!
On Fox Business, President Trump told Larry Kudlow if Warsh “does the job he’s capable” of, “we can grow at 15%, I think more….” But Warsh’s Senate confirmation may be delayed, since Senator Thom Tillis, a retiring Republican from North Carolina, pledged to block any Fed confirmation as long as the Trump Justice Department pursues a probe into Jerome Powell for huge Fed building cost over-runs.
Interestingly, Fed Governor Stephen Miran is still pushing for more Fed rate-cuts in the wake of the stronger-than-expected January payroll report. Specifically, Bloomberg reported, “Miran said planned supply-side reforms such as a reduction of business regulations, along with an expectation that housing inflation will slow, will clear the way for policy-makers to continue lowering their benchmark rate.”
Economic Statistics Add Up to a Good Argument for More Rate Cuts
The biggest economic news last week was the Labor Department announcing the Consumer Price Index (CPI) for January rising just 0.2% (and 2.4% in the past 12-months). Economists were expecting a 0.3% increase, so this was better than expected and helped the 12-month CPI decelerate from a 2.7% annual pace to 2.4% in January. The CPI is now running at its slowest annual pace since last May.
The core CPI, excluding food and energy, rose 0.3% (and 2.5% in the past 12-months). Food costs rose 0.2% and energy prices declined 1.5% in January, aided by a 3.2% drop in gasoline prices. Shelter costs (owner’s equivalent rent) remained tame, at 0.2%, dropping to 3% in the past 12-months. Overall, this CPI report bodes well for a good Personal Consumption Expenditure (PCE) rate next week (the PCE is the Fed’s favorite inflation gauge), as Treasury yields meandered lower in the wake of the January CPI.
Also last week, the Commerce Department said December retail sales were unchanged and November’s retail sales were revised up to +0.6% (from 0.3% previously reported). Due to the federal government shutdown, the Commerce Department is a month late with its data and, due to the substantial November upward revision, the retail sales-data is not being taken as seriously as it has been in the past. Treasury yields declined after this retail sales report, since it raises the odds of another Fed key interest rate-cut.
Last Wednesday, the Labor Department announced payrolls were up 130,000 in January, substantially above the economists’ consensus expectation of a 75,000 increase. In previous months, the November and December payrolls declined by a cumulative 17,000. Interestingly, government jobs declined last month, by 42,000, so the private-sector created 172,000-jobs in January. The unemployment rate declined to 4.3% and average hourly earnings rose by 0.4% to $37.17 in January and 3.7% in the past 12-months.
And finally, the National Association of Realtors on Thursday said existing home sales plunged 8.4% in January to a 3.91-million annual pace, down from a revised 4.27-million pace in December. Economists expected a 4.15-million rate of existing home sales in January, so this was the largest monthly drop in four-years. However, severe winter weather hit much of the U.S. in January and likely had an impact on falling existing home sales, so we have to wait at least a month to see if there is a rebound in home sales.
The Latest News on Possible Military Conflicts in Cuba and Iran
There is currently a crude-oil blockade on Cuba, so flights are being canceled due to a lack of aviation fuel, and hotels are closing due to persistent blackouts. There are reportedly 4,000-Russian tourists in Cuba and Aeroflot said it was restricting service and is flying in empty planes to pick-up tourists. There are also reportedly 3,000-Canadian tourists in Cuba stranded after Air Canada suspended all flights to Cuba due to jet-fuel shortages. On January 29th, President Trump’s executive order described Cuba as “an unusual and extraordinary threat” and warned of new tariffs for any country supplying Cuba with crude-oil, so Mexican crude-oil exports stopped. The U.S. seems bent on leadership change in Cuba!
On the other side of the world, the U.S. Navy seized the Aquila II, its eighth-Venezuelan crude oil tanker, this one in the Indian Ocean after a month-long pursuit as it tried to evade our blockade of Venezuela. With the U.S. Navy now pursuing and seizing “shadow-tankers” should concern Iran and Russia over their reliance on these shadow-tankers to transport crude-oil, despite U.S. sanctions.
The Wall Street Journal reported the Trump administration has discussed seizing Iranian crude-oil tankers to put further pressure on Iran to end its nuclear program, but it held off over worries about disrupting the global crude-oil market. The U.S. and Iran met in Oman to discuss dismantling Iran’s nuclear program, since the U.S. wants Tehran to: (1) stop enriching uranium, (2) curb its ballistic missile program, and (3) end its support for regional proxies destabilizing the Middle East. Iran said it is willing to discuss only the first item, its nuclear work, so if these negotiations fail, the U.S. could conduct another military strike, which is why we have assembled a substantial Naval armada in the region.
Iran’s Foreign Minister, Abbas Araghchi, told Iranian state TV after the talks concluded he thought we “can reach an agreed framework for future talks” if the process continues in the same vein. Araghchi added, “The subject of our talks is strictly nuclear, and we are not discussing any other issues with the Americans.” Obviously, Iran is an expert in delaying tactics, but the U.S. has assembled an armada to attack key nuclear and military targets in Iran, so the U.S. could lose patience with Iran’s negotiators.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
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Louis Navellier
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