Warsh Pushes for New Inflation Framework, Asserts Fed Independence
Kevin Warsh, US President Donald Trump's nominee to lead the Federal Reserve, said the central bank needs a new framework to deal with persistent inflation, without specifying what that might look like or its implications for interest rates.
In his initial testimony before the Senate Banking Committee on Tuesday (April 21), Warsh blamed the Fed for allowing inflation to surge following the Covid-19 pandemic. He argued that although inflation is now lower than in years past, price pressures are still being felt by US households and require a "regime change" in the way policy is conducted, including a "new inflation framework."
Warsh did not provide any indication of interest rate policy. This comes amid political pressure from Trump, who has been pushing for rate cuts since his re-election and has expressed disappointment if Warsh does not cut rates soon after taking office. Responding to a question from Senator Jack Reed about this pressure, Warsh said the president is inclined to support rate cuts, but that independence is the Fed's decision, and the central bank's leadership must determine what is right policy-wise.
In the same session, Warsh also declined to directly answer Senator Elizabeth Warren's question about the 2020 election results, noting that Congress had certified Joe Biden as president. He added that he would sell undisclosed assets before being inaugurated as Fed chairman. In disclosure documents, Warsh and his wife, Jane Lauder, reported assets of at least US$192 million, with a total estimated wealth of even more, placing him among the wealthiest Fed officials in the central bank's history.
For markets, the key message from the hearing was a combination of calls for a "new inflation framework" and assertions of independence, but without concrete guidance on the direction of interest rates. The focus will be on the progress of the confirmation process, possible details about the design of the inflation framework, and how Warsh balances political demands with his price stability mandate. (Arl)*
Source: Newsmaker.id
