As Kevin Warsh loosens up in the on-deck circle ahead of a pivotal Senate Banking Committee hearing scheduled for Tuesday, prepared testimony made public Monday shows a Fed chair nominee ready to defend central bank independence while remaining receptive to a “diversity of views” from public officials, including President Donald Trump.
On Federal Reserve independence, consistently under attack by Trump over the past year in his pursuit of lower interest rates, the former Fed governor will say he favors “a clearer, cleaner match between the Fed’s powers and responsibilities,” underscoring his view that “Fed independence is largely up to the Fed.”
“In a time that will rank among the most consequential in our nation’s history, I believe a reform-oriented Federal Reserve can make a real difference to the American people,” Warsh plans to say, according to the prepared remarks reviewed by Scotsman Guide. “The stakes could scarcely be higher.”
Trump has previously stated that no one would become Fed chair if they could not deliver lower interest rates — an unprecedented statement suggesting comfort within the administration of enmeshing fiscal and monetary policy goals.
To achieve any adjustments lower, Warsh will need to find consensus among a body of policymakers that have strongly supported a wait-and-see approach amid the global price shocks from the Iran war and ongoing tariff-related inflation.
Warsh, who previously served as the youngest-ever Fed governor from 2006 to 2011, did not touch on specifics of economic or monetary policy in the prepared remarks. He did, however, repeat an overarching view of inflation as “a choice,” noting that the Fed must “take responsibility for it.”
Typically dovish Fed Governor Christopher Waller said Friday that the layering of price shocks in the economy could entrench inflation at higher levels, while also warning that oil and securities markets seem to be “undervaluing the risk” of prolonged economic turmoil from the Middle East conflict.
As timelines stand, Warsh’s nomination is already facing headwinds, with outgoing Sen. Thom Tillis, R-N.C., reiterating last week that he would seek to block confirmation of a Fed chair replacement until a widely discredited criminal investigation into current Fed Chair Jerome Powell is resolved.
Senate Democrats on the banking committee also took the formal step of sending a letter to the committee chair, Sen. Tim Scott, R-S.C., urging a delay to any formal testimony from Warsh until parallel investigations into Powell and Fed Governor Lisa Cook are both resolved. Trump tried to fire Cook over unproven allegations of mortgage fraud last year.
Just last week, however, Trump told Fox News that he refused to drop the Department of Justice’s probe into Powell, regarding Senate testimony Powell gave last summer about renovations to the Fed headquarters. Lawmakers from both parties on the Senate Banking Committee have said no crime was committed by Powell.
Warsh will almost certainly face tough questioning during the committee hearing concerning his views on the economy, inflation and the impact of AI on productivity and labor markets, as well as his relationships with politicians and power brokers across the U.S. economy and possibly the world.
In his opening statement, he plans to say that central bankers must be “dedicated enough to make judgments faithfully and wisely.”
“I am committed to ensuring that the conduct of monetary policy remains strictly independent,” shared Warsh. “I am equally committed to working with the administration and Congress on non-monetary matters that are part of the Fed’s remit.”
