Kevin Warsh, the nominee for chair of the U.S. Federal Reserve (Fed), said on the 21st (local time) that he has no intention of simply following President Donald Trump's pressure to cut interest rates.
At his confirmation hearing before the Senate Banking Committee that day, Warsh was asked whether he would become Trump's "human puppet" if confirmed, and said, "Absolutely not. If I am confirmed as Fed chair, I will act independently (not as a puppet)," adding, "I did not say anything like, 'If you give me the position, I will cut rates,' to the president."
He said, "Presidents tend to prefer rate cuts. The difference is that President Trump expresses that very publicly, without intermediaries or circumlocution," adding, "But the Fed's independence rests with the Fed. The Fed's leadership must decide for itself what is right."
He went on to explain, "I do not believe the independence of monetary policy is threatened simply because elected officials express their views on interest rates." This is taken to mean that even if President Trump, an "elected official" who nominated him as the next Fed chair, pressures for a rate cut, monetary policy will be decided based on the Fed's independent judgment.
However, Warsh pointed out problems with the system for analyzing prices, which the Fed currently uses as a key gauge when setting monetary policy. He said, "We are still feeling the effects of the policy errors of 2021 and 2022," adding, "It is true that inflation is less of a problem (than then), which means the inflation rate is less severe than a few years ago."
He added, "We used the core personal consumption expenditures (PCE) price index, excluding food and energy. That was to roughly infer what the (price) situation was," and said, "We no longer need to make such rough inferences. What I am most interested in is the 'underlying inflation rate.'"
Incumbent Fed Chair Jerome Powell's term runs until next month, but Warsh must win Senate confirmation to take office. However, after the Department of Justice expanded its investigation targeting Powell over alleged excessive spending on renovations at the Fed's headquarters, Sen. Thom Tillis (R-N.C.) of the Senate Banking Committee has said he will oppose Warsh's confirmation until the investigation into Powell is resolved.
At the hearing that day, Tillis also told Warsh, "This investigation (by the Department of Justice) needs to be removed for me to support your confirmation." The Senate Banking Committee, composed of 24 members, currently has 13 Republicans and 11 Democrats. If all Democratic members and at least one Republican member oppose, the confirmation cannot clear the committee.
Meanwhile, President Trump again publicly pressed Warsh to cut rates that day. In a CNBC interview that morning, when asked whether he would be disappointed if Warsh did not lower the benchmark rate immediately upon appointment, he answered, "Yes."