Federal Reserve Chairman candidate Kevin Warsh said on Monday that the central bank must be largely independent of political influence, but must remain focused on its core goals.
In remarks scheduled to appear before the Senate Banking Committee on Tuesday, Mr. Warsh expressed a firm commitment to fighting inflation, mentioning the labor market only once.
“Simply put, the Fed’s independence depends primarily on the Fed,” said a former Fed director.
Warsh’s talk also addressed familiar criticisms he has raised in recent years, namely that the Fed has repeatedly crossed boundaries and expanded into areas such as climate change and social inequality.
“The Fed should maintain the status quo,” he said. “The Fed’s independence is at greatest risk if it wanders into fiscal and social policies for which it has no authority or expertise.”
President Donald Trump announced in late January that he would nominate Warsh to replace current Chairman Jerome Powell.
Since the replacement process began, questions have arisen about whether Warsh and other Trump appointees can withstand repeated pressure from Trump and other White House officials to lower interest rates.
Kevin Warsh, former member of the Federal Reserve Board;
Provided by: Hoover Institution
Mr. Warsh did talk about the importance of political independence, but with some conditions.
“I don’t think the independence of monetary policy is particularly threatened when elected officials (the president, senators, and representatives) express their views on interest rates,” he said.
Additionally, he said the Fed does not enjoy the same independence in some of its other responsibilities as it does in setting interest rates and other aspects of monetary policy. He specifically addressed the “management of public funds” as the investigation into the multibillion-dollar renovation of the Federal Reserve’s headquarters progresses.
Mr. Powell’s term expires in May, but his nomination has been complicated by an investigation launched into the project by the federal prosecutor’s office in Washington, D.C. Sen. Thom Tillis (RN.C.) has vowed to prevent Warsh’s nominee from leaving the committee until the investigation is resolved, and Powell himself has pledged to remain chairman until the matter is resolved.
Despite the potential hurdles, administration officials are confident Warsh will be confirmed.
“The White House remains committed to working with the Senate to swiftly confirm Kevin Warsh as the next Chairman of the Federal Reserve System,” said White House Press Secretary Khush Desai. “Mr. Warsh’s academic background, success in the private sector, and previous experience on the Federal Reserve Board make him uniquely qualified to restore trust and capacity in decision-making at the Fed.”
During his two terms in office, Trump has called on the Fed to lower interest rates. He has repeatedly criticized Powell, sometimes harshly and personally, and on several occasions threatened to fire him.
President Trump is trying to fire Governor Lisa Cook. The case is currently awaiting a Supreme Court ruling regarding presidential authority over Fed appointees.
