Kevin Warsh, the nominee for Federal Reserve chair, said the central bank must stay “strictly independent” on monetary policy, even as he said he would work with Congress and the Trump administration on other issues. He also proposed a new “Fed/Treasury accord” to govern the Fed’s balance sheet, though he has not spelled out the details. [1]
Warsh made the comments at his Senate confirmation hearing on April 21, where he faced questions about Fed independence and monetary policy. In the hearing, he said, “Fed officials are not entitled to the same special deference in areas affecting international finance, among other matters.” [1]
The remarks drew confusion and concern from six former Fed officials interviewed for the article, who said they were unsure how Warsh’s approach would affect the central bank’s crisis tools and autonomy. One former senior Fed official, speaking anonymously, said, “If followed to its logical conclusion, the Fed could lose control of its balance sheet.” [1]
Former Richmond Fed President Jeffrey Lacker said he would welcome an accord if it kept the Fed focused on monetary policy and left credit policy to the Treasury. But he warned of a different outcome, saying, “I can also imagine a less constructive agreement that lets the Treasury use the Fed’s balance sheet to bypass Congress, perpetuating bad practices and compromising the Fed’s independence.” [1]
Warsh did not respond further when reached for comment on his views. [1]
