Kevin Warsh, chair of the U.S. Federal Reserve, appeared at a Senate Banking Committee hearing on the 15th and said, "Even if there is external interference, I will defend the independence the Central Bank holds to the end."
A day after appearing before the House Financial Services Committee and stressing that he would focus on curbing inflation, Warsh appeared before Congress for a second straight day to explain the direction of monetary policy and economic issues.
On this day, when a lawmaker asked what conversations he had had with President Trump after taking office, Warsh began by saying, "I do not want to take outside the discussions I have had with the president." He added, "I will say what I have repeatedly told the president and the treasury secretary. They chose an independent person to do an independent job, and that is exactly what I will do."
When Democratic Sen. Chris Van Hollen repeatedly pressed on whether the president had intervened, Warsh said, "Even before I took this position, (the president) did not try to influence the conduct of monetary policy," and emphasized, "Even if he tries to do that, I will keep my head down and do my job."
Since his second-term inauguration last year, President Trump has consistently argued that U.S. interest rates should be slashed sharply. He also leveled repeated sharp criticism at former Federal Reserve Chair Jerome Powell, Warsh's predecessor, saying "the pace of rate cuts is slow." The current Federal Reserve benchmark rate is in the 3.5% to 3.75% range. Trump said it should be brought below 1%. Looking at recent U.S. price indicators, inflation has eased somewhat but still far exceeds the Federal Reserve's 2% target. Because of this, the Central Bank, which must prioritize price stability, is likely to pursue an interest-rate policy directly opposite to the president's demand, making its internal calculus complicated.
That day as well, immediately after Warsh's remarks, President Trump pressed for rate cuts in a Fox Business interview. He also showed continued confidence in Warsh. Trump said, "I want to see rates go down. I want our country to have the lowest rates anywhere in the world." When asked whether he would give the newly appointed Federal Reserve chair room to work independently, he answered, "Yes. I respect him a lot." However, Trump added, "Don't forget he has a committee. It could be hostile," expressing wariness toward members inside the Federal Reserve.
Meanwhile, Warsh said that investments related to artificial intelligence could spur prices in the short term but are unlikely to lead to long-term inflation. He said, "I do not necessarily think that a single bout of price increases leads to inflation," explaining, "because there is a supply-side response that follows."
He also drew a line by saying, "If you ask whether it will raise price indicators over the next 12 months, I would answer that it is possible, but whether it will cause inflation depends on the Federal Reserve." Regarding the recent mixed warnings inside the Federal Reserve about inflation risks, he dismissed them by saying, "Please see it as a family quarrel with good intentions."