Fed pick Warsh testifies

Kevin Warsh told senators on April 21 that President Donald Trump had not asked him to preset interest-rate decisions as a condition of leading the Federal Reserve. (banking.senate.gov) At the Senate Banking Committee hearing, Warsh said Trump had never asked him to “predetermine, commit, fix, decide” any rate move in their talks. CNBC reported that Warsh also said he would not make a rate decision simply because a president wanted one. (cnbc.com) The hearing took place Tuesday, April 21, at 10 a.m. in the Dirksen Senate Office Building on Warsh’s nomination to serve as a member and chair of the Board of Governors of the Federal Reserve System. (banking.senate.gov) The Federal Reserve sets short-term interest rates that shape borrowing costs across mortgages, credit cards, business loans and Treasury markets. When investors think a chair will cut rates sooner or resist political pressure, bond yields, stocks and the dollar can all move within minutes. (cnbc.com) On Tuesday, the 10-year Treasury yield rose more than 6 basis points to 4.313%, the 2-year yield rose more than 8 basis points to 3.802%, and the 30-year yield climbed more than 3 basis points to 4.916% as traders tracked both Warsh’s testimony and developments in U.S.-Iran talks. (cnbc.com) Warsh’s comments addressed a question Democrats had been raising for weeks. In a February 12 letter, Senator Elizabeth Warren and Senator Chuck Schumer said the president had reportedly asked whether he could trust Warsh to support rate cuts and pressed him to explain whether any loyalty demand had been made. (banking.senate.gov) Warren opened a second line of attack on April 15, asking the Fed for records from Warsh’s 2006 to 2011 tenure as a governor and for documents tied to his role in the 2008 financial crisis and an ethics waiver involving Morgan Stanley. (banking.senate.gov) Warsh used his prepared remarks to argue that central-bank independence is not unlimited. He said the Fed must remain “largely independent of political influence” while staying focused on its core job and avoiding fiscal or social policy. (cnbc.com) Trump, meanwhile, kept up public pressure. CNBC reported that he said Tuesday he would be disappointed if Warsh did not cut rates immediately once in office. (cnbc.com) That leaves senators weighing two records at once: Warsh’s testimony that he would not act as a political instrument, and a White House still demanding lower rates in public as his confirmation moves ahead. (cnbc.com)