Fed Chair Nominee Vows Independence on Setting Rates

Kevin Warsh, Federal Reserve chair nominee, said he plans to testify at his confirmation hearing Tuesday that the bank's independence to set interest rates is essential but must be earned, Politico reported.

Warsh is set to testify before the Senate Banking Committee. His opening statement was obtained by Politico.

Warsh said policymakers must make their decisions using "analytic rigor, meaningful deliberation, and unclouded decision-making" while also saying President Donald Trump's calls for lower rates do not threaten the Fed's independence.

"I do not believe the operational independence of monetary policy is particularly threatened when elected officials — presidents, senators, or members of the House — state their views on interest rates," Warsh's statement read.

"Central bankers must be strong enough to listen to a diversity of views from all corners," it added.

The statement further indicated that Warsh will vow to keep inflation in check, calling price stability a mandate for the Fed, "without excuse or equivocation, argument or anguish," according to Politico.

"Inflation is a choice, and the Fed must take responsibility for it," Warsh's statement said.

"Low inflation is the Fed's plot armor, its vital protection [against] slings and arrows. So, when inflation surges — as it has done in recent years — grievous harm is done to our citizens, especially to the least well-off," the statement added, according to Politico.

The statement continued by saying that the Fed should not get involved in fiscal and social policies outside of its statutory authority.

"I believe that monetary policy independence is earned — and better policy decisions crafted — by steering clear of distractions," Warsh's remarks read.

"I am committed to ensuring that the conduct of monetary policy remains strictly independent," the statement continued. "I am equally committed to working with the Administration and Congress on non-monetary matters that are part of the Fed's remit."

"And I commit to accountability in all the Fed's functions," Warsh's message read.

Republicans have drawn a firm line, vowing to block Warsh's confirmation unless the Trump administration halts what they see as a misguided and politically driven criminal probe into current Fed Chair Jerome Powell and the Federal Reserve — an effort they argue undermines, rather than protects, the central bank's independence.

Warsh, long regarded as a staunch inflation hawk, has in recent years adjusted his outlook, pointing to productivity gains driven by technological innovation as a reason interest rates can be lower without fueling inflation.

His earlier push to shrink the Fed's $6.71 trillion balance sheet — shaped by his experience as a governor during the early expansion of the central bank's bond holdings — has similarly evolved as economic conditions have shifted.

As Trump considered potential successors to Powell over the past year, Warsh emerged as a vocal critic of the Fed's direction, calling for "regime change," suggesting leadership would require "knocking some heads," and describing Powell's tenure as "broken," though offering limited specifics on how he would implement reforms.

Warsh's evolving stance on interest rates — and the extent to which Trump's economic vision has shaped it — are expected to come under scrutiny at his upcoming confirmation hearing. The session will be chaired by Sen. Tim Scott, R-S.C., who, along with other Republican lawmakers, has expressed support for Warsh's nomination even as disagreements persist over the conditions for moving it forward.

Reuters contributed to this report.