A key question facing new Federal Reserve Chair Kevin Warsh is whether he will have to raise rates in the next few meetings to underscore his commitment to fighting inflation.
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The Supreme Court on Monday said the Federal Reserve, unlike any other agency in Washington, has a measure of independence from the presidency and day-to-day politics.
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The Supreme Court on Monday dramatically expanded presidential power, upholding President Donald Trump’s firings of the heads of independent federal agencies with one important exception: the Federal Reserve.
The stress test applies only to the nation’s most systematically important banks, those whose failures would bring significant turmoil to the financial system.
Warsh, like many economists, thinks the financial markets have become too dependent on Fed guidance, and that such direction is more effective in financial crises or economic downturns.
It’s a sharp change from March, when no policymakers penciled in a hike and the committee as a whole forecast one cut in 2026.
Economists say Warsh will likely aim for a neutral approach, largely because he is taking over the Federal Reserve at a challenging time.
The catalysts for higher rates are strengthening even as President Donald Trump renews his calls for looser monetary policy on the eve of the first Fed policy meeting led by new Chairman Kevin Warsh.
Kevin Warsh, 56, a former top Fed official, is becoming chair at an unusually difficult time for the independent agency.
The Federal Reserve left its benchmark interest rate unchanged for the third straight meeting but signaled it could still cut rates in the coming months, moves that attracted the most dissents since October 1992.
Federal Reserve Chair Jerome Powell could signal he will stay with the Fed even as a Senate panel is expected to confirm his replacement.
The announcement by Sen. Thom Tillis removes a big hurdle to President Trump’s effort to install Kevin Warsh, a former high-ranking Federal Reserve official, in the job in place of Jerome Powell.
Kevin Warsh, President Donald Trump’s pick to lead the Fed, pledged independence from the White House, even as Trump said he would be disappointed if his pick doesn’t immediately cut rates.
The minutes underscore the Fed’s dilemma as it seeks to fill its congressional mandates of low inflation and maximum employment.
Rate increases by the Federal Reserve would be a sharp shift from late last year, when the central bank cut its key rate three times.
Federal Reserve Chair Jerome Powell suggested that the central bank remained concerned about inflation that was still stubbornly elevated even before the Iran conflict’s impact on gas prices.
The Fed will release a set of quarterly projections on Wednesday, and they could alter their forecast of one rate cut this year to zero.
Warsh’s nomination, which was initially announced Jan. 30, was forwarded Wednesday to the Senate, where it will be taken up by the Senate Banking Committee.
The story the Trump team is telling — that a visionary Federal Reserve chair, Alan Greenspan, fueled the 1990s boom by keeping interest rates low — is incomplete at best.
Federal Reserve governor Christopher Waller also said that the Supreme Court’s decision to strike down many of Trump’s tariffs would likely have only a limited impact on the economy and inflation, and therefore wouldn’t affect his view on rates.
President Trump told reporters Friday that he didn’t want to ask Kevin Warsh to agree to cut rates because that would be “inappropriate,” even if “it probably would be allowed.”
Whether Kevin Warsh can maintain the Fed’s long-time independence from day-to-day politics while also placating Trump will be a tremendous challenge.
