Warsh stresses independence at Fed hearing

Kevin Warsh told senators on April 21 that he made no deal with President Donald Trump to cut interest rates if confirmed to lead the Federal Reserve. (apnews.com) At his Senate Banking Committee hearing, Warsh said Trump “never asked me to commit to interest rate cuts” and said he would “absolutely not” serve as the president’s “sock puppet.” He also said the central bank’s independence is critical, though “it has to be earned.” (apnews.com, dispatch.com) Warsh used the hearing to argue for what he called “regime change” at the Fed, blaming the institution for missing the inflation surge that followed the Covid-19 pandemic. He said he wants a new framework for controlling inflation and a possible overhaul of how Fed officials communicate policy to the public. (reuters.com, reuters.com) The hearing centered on whether a Trump nominee can keep distance from a White House that has publicly pressed for lower rates. Trump renewed those calls on April 21, while Democratic senators, led by Elizabeth Warren, pressed Warsh on whether he would resist political pressure. (politico.com, cnbc.com) The Fed sets short-term interest rates to slow or speed the economy, and independence means those decisions are supposed to be made without day-to-day direction from elected officials. That question is acute now because the central bank held its benchmark rate at 3.5% to 3.75% on March 18 and said it would wait for more data before making further moves. (federalreserve.gov) Inflation data has made that caution easier to defend. The Consumer Price Index rose 0.9% in March and 3.3% from a year earlier, with gasoline helping drive the jump, leaving inflation above the Fed’s 2% goal. (bls.gov) That backdrop has limited expectations for quick easing even as Warsh tried to reassure senators and investors. Reuters reported that policymakers and markets still see inflation and energy risks as reasons the Fed is unlikely to cut rates quickly in the near term. (reuters.com) Warsh, 56, is a former Fed governor and longtime Wall Street figure, and his nomination would put him in charge of the world’s most influential central bank if the Senate confirms him. His testimony left the immediate message unchanged: no promised rate cuts, and no public break from the Fed’s claim to independence. (reuters.com, apnews.com)