Fed Chair nominee Kevin Warsh told senators at his confirmation hearing before the Senate Banking Committee on Tuesday that he would be “strictly independent” on decisions related to interest rates and that President Trump’s calls for lower borrowing costs didn’t bother him.
At the hearing, Warsh pledged to fight inflation even as the president renewed his demands for interest rate cuts, the AP reported. A hearing planned for last week was delayed.
Warsh, 56, a former top Fed official whom Trump named in January to replace the current Fed Chair Jerome Powell, will face many challenges should he be confirmed. Trump has attacked Powell repeatedly for not cutting rates.
Warsh will need to balance Trump’s demands for lower interest rates as the war in Iran pushes the price of gasoline higher, adding to inflationary pressures that already exist.
Typically, higher inflation leads the Fed to raise rates, or at least keep them steady, rather than cut them. When the Fed changes its key interest rate, it can affect mortgages, auto loans, and business borrowing.
Warsh told the committee that one of his main goals would be to fight inflation, which remains elevated at 3.3% annually.
No Rate Cut? Trump Would be Disappointed
“Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish,” Warsh said. “Inflation is a choice, and the Fed must take responsibility for it.”
In an interview on Tuesday on CNBC, Trump was asked if he would be disappointed if Warsh didn’t cut rates “right away” if confirmed.
“I would,” Trump replied.
CNBC noted that Warsh would be in a tough spot if confirmed.
Inflation is worsening as the Iran war has sent gas prices upward, making it harder for the Fed to implement the interest rate cuts Trump desperately seeks. The conflict could also slow the economy and hiring.
If Warsh ultimately becomes chair, he may find his predecessor, Jerome Powell, still sitting on the Fed’s governing board, an uncomfortable arrangement that hasn’t occurred since the late 1940s, CNBC noted. Last week, Trump threatened to remove Powell from office as a governor if he didn’t leave on his own.
Warsh is a former top official at the Fed and a wealthy investor, and he faced a range of tough questions at the hearing.
Democrats have raised the issue of what they see as a lack of transparency regarding some of his vast financial holdings, which total more than $100 million, according to a recent disclosure. If confirmed, Warsh would become the wealthiest Fed Chief ever.
In his opening statement, Warsh expressed support for the Fed’s independence.
Questioned on a Variety of Issues
Sen. Elizabeth Warren, D-Massachusetts, said that Trump hasn’t just stated opinions on rates, but has sought to fire a Fed governor and is investigating Powell for recent testimony about the Fed.
Warsh fielded questions on issues ranging from his views on monetary policy to his sprawling and complex personal finances to his ties to the Trump White House. He would become the wealthiest Fed chair if confirmed.
Warsh gave the committee a qualified endorsement of Fed independence — but noted he doesn’t believe that dynamic is endangered when the central bank’s actions are questioned by elected leaders.
Trump, who originally nominated Powell for Fed chair during his first term in 2017, has waged a long-term campaign to try to browbeat the central bank leader into cutting interest rates.
In recent months, Powell has been caught up in a Department of Justice criminal probe after refusing to acquiesce to Trump’s demands. Trump told CNBC’s “Squawk Box” early Tuesday that he doesn’t plan to pressure the DOJ to wrap up that probe.
Sen. Thom Tillis, R-N.C., has said he will block Warsh’s nomination from leaving the Senate Banking Committee until the probe is finished. Powell said he will stay on as chair until a successor is confirmed, consistent with Fed policy.
On Tuesday, Politico reported that key Republican senators appear to be coalescing around a plan that could end Tillis’ blockade of Warsh’s nomination to chair the Federal Reserve.
Tillis and Senate Banking Chair Tim Scott (R-S.C.) are floating a special Congressional committee to examine construction projects under the banking committee’s jurisdiction that could replace the Justice Department investigation into whether Powell lied about cost overruns related to renovations of the central bank’s headquarters.
