Next Fed Chair Candidate Who Publicly Criticized Powell: "Stimulate the US Economy"

"Asset prices are (overheated) melting down, yet the economy is being goosed." Kevin Warsh, a former Fed governor and a candidate for the next chairman of the U.S. Federal Reserve under the Trump 2.0 administration, publicly criticized the policy stance of current Chairman Jerome Powell.

Kevin Warsh, Former Fed Governor
[Photo by CNBC]

On the 25th (local time), Warsh appeared on CNBC's Squawk Box and said, "The whole world may have been impressed by the U.S. GDP growth and stock market rally," but added, "I cannot say they were impressed by the U.S. economic engine." He pointed out issues such as asset price overheating, saying, "It seems the engine is being stimulated even at full employment."

Regarding the recent disagreement within the Fed over whether there will be three or one rate cuts this year, he criticized the very act of pre-announcing such policy paths as "very unproductive." Warsh said, "What I want to suggest first is that the 19 people sitting around the Federal Open Market Committee (FOMC) table should spend more time thinking about and explaining what factors can influence inflation," adding, "I would say I am somewhat puzzled by their framework."

Before presenting interest rate forecasts, he explained that he cannot agree with the inflation theory currently applied in practice by the Fed. He said, "Last year, we came to believe that inflation was service and wage inflation," but "the new indicators released by them (the Fed) show that service inflation excluding housing is over 4%, a level not seen for a long time." He continued, "They are in a more difficult position than we think," expressing concerns about inflation.

Along with this, Warsh argued that while the current U.S. interest rate of 5.25?5.5% is sufficiently 'restrictive' to lower inflation, the Fed’s dot plot is undermining this. This is an extension of his earlier comment that presenting rate forecasts itself is unproductive. He said, "The dot plot is weakening interest rates," and "As a result, they (the Fed) do not appear restrictive in most economic sectors they claim."

This interview drew attention amid the rising possibility of former President Donald Trump’s re-election in the upcoming November presidential election. Warsh is one of three candidates recently mentioned by Trump’s aides as potential next Fed chairmen. Besides Warsh, the others mentioned are Arthur Laffer, a former University of Chicago professor famous for the 'Laffer Curve,' and Kevin Hassett, former White House economic advisor.

Warsh also seemed aware of these rumors, saying, "Central bank officials should be nervous," and "If my appearing on the broadcast and speaking sounds uncomfortable, that’s our job." Powell’s current term, who previously clashed with Trump over rate decisions, lasts until 2026.

This content was produced with the assistance of AI translation services.