WASHINGTON--Federal Reserve chief nominee Kevin Warsh said on Tuesday he had made no promises to President Donald Trump about cutting interest rates, as he tried to assure U.S. senators mulling his confirmation to lead the U.S. central bank that he would act independently of the White House while pursuing broad reforms.
In a hearing that ranged from Warsh's calls for "regime change" at the Fed to contentious exchanges over his personal finances, the 56-year-old lawyer and financier said that in his conversations with Trump about the job, "the president never asked me to commit to interest rate cuts ... he did not demand it ... the president never asked me to commit to any such thing nor would I do so."
Trump, who nominated Warsh for the top Fed job, has repeatedly expressed his confidence that his pick will deliver lower rates if confirmed, and said in a CNBC interview just prior to the hearing on Tuesday that he would be disappointed if it didn't happen.
Warsh is considered likely to be confirmed, but the timing of any Senate approval remains unclear. Republican Senator Thom Tillis, in an unusual turn, used his time during the hearing not to ask questions of Warsh, but to detail why he would delay the confirmation until the Trump administration drops an ongoing criminal probe of current Fed Chair Jerome Powell over a renovation of the central bank's headquarters in Washington. Tillis' hold on the nomination could leave Warsh unconfirmed and Powell remaining as Fed chief even after his tenure in the top job ends on May 15.
In response to a series of questions from Democratic committee members trying to highlight potential distance between the nominee and Trump, Warsh declined to comment about the administration's various efforts to put pressure on the Fed, including the probe of Powell and the attempt to fire Fed Governor Lisa Cook, a matter that is pending before the U.S. Supreme Court.
He also refused to say that Trump lost the 2020 election, or to comment on whether the Republican president's call for interest rates to be cut as low as 1%, a level typically not seen outside of efforts to fight an economic downturn, made economic sense at a time when the economy is still growing and unemployment remains relatively low.
Warsh also said that while he would stick with plans to sell more than $100 million in assets if confirmed for the Fed job, under an agreement with ethics officials, he would not detail what those assets are or how and to whom they would be sold. The proceeds, he said, would go into "plain vanilla" assets.
But Warsh did give some rough details on what he means by his call for "robust reform" at the U.S. central bank.He blamed the central bank under Powell for an inflation surge in the wake of the COVID-19 pandemic that continues to hurt U.S. households. Coupled with the implications of artificial intelligence for jobs and prices, he said he would move quickly to see if new data tools could provide better insight on inflation, and also to discourage policymakers from saying too much about where interest rates might be heading.
"What the Fed needs are reforms to its frameworks and reforms to its communications," the former Fed governor said, adding that he would rather have "messier" policy meetings with more disagreements to hash out around the table and less public commentary ahead of time.
"Too many Fed officials opine about where interest rates should be. ... That is quite unhelpful," he said, an issue that could put him at odds with the presidents of the Fed's 12 regional banks who see public communications and frequent appearances now as an integral part of their job.
"The fatal policy errors going back four or five years" are a legacy that families are still working through, Warsh said, arguing that the Fed needed "a new and different inflation framework" that, for example, might exploit advances in large data collection to better gauge inflation trends.
