Warsh, Fed Chair Nominee: "President's Interest Rate Requests Do Not Threaten Independence"

Fed building. Photo by Reuters and Yonhap News Agency

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Kevin Warsh, a candidate for the next Chair of the U.S. Federal Reserve (Fed), has stated that politicians' calls for interest rate adjustments do not threaten the Fed's independence. This position contrasts with experts who argue that U.S. President Donald Trump's demands for rate cuts undermine the Fed's independence.

According to the Financial Times (FT) and others on April 20 (local time), Warsh submitted a prepared statement ahead of his confirmation hearing before the U.S. Senate Banking Committee on the 21st. He said, "I do not believe that the expression of views on interest rates by elected officials-whether the President, Senators, or House members-poses any particular threat to the operational independence of monetary policy." He added, "The greatest risk to the Fed's independence occurs when the Fed intervenes in fiscal and social policies for which it has neither authority nor expertise." He further emphasized, "For matters outside of monetary policy, the Fed is equally committed to cooperating with the executive branch and Congress."

On the other hand, Warsh also included remarks in his speech highlighting the importance of Fed independence. Regarding the Fed's independence, he wrote, "I am committed to ensuring that the conduct of monetary policy maintains strict independence," adding, "I believe the independence of monetary policy is achieved by eliminating obstacles and leads to better policy decisions."

The U.S. Senate Banking Committee will hold Warsh's confirmation hearing on the 21st. Democratic lawmakers, who are in the opposition, have expressed concerns that if Warsh becomes Fed Chair, he will serve as a puppet for President Trump. President Trump has publicly criticized current Fed Chair Jerome Powell and has repeatedly called for interest rate cuts.

Sarah Binder, a professor of political science at George Washington University and a researcher on Fed independence, stated, "This confirmation hearing is unprecedentedly significant." She noted, "President Trump and his supporters hope that Warsh will promise to cut rates no matter what, but senators from both parties want to hear Warsh promise to uphold the Fed's independence."

The Senate Banking Committee consists of 24 members (13 Republicans and 11 Democrats). If all Democratic members and at least one Republican oppose the nomination, it is highly likely that the nomination will not pass the committee. In this context, Republican Senator Thom Tillis has previously stated that no Fed nominees should be confirmed until the Justice Department's investigation of Chair Powell is concluded.

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