Federal Reserve chair nominee Kevin Warsh has stressed the importance of central bank independence while warning policymakers to remain focused on core monetary objectives.
In prepared remarks set to be delivered to the Senate Banking Committee, Warsh said the Federal Reserve must remain largely insulated from political pressure but also avoid straying beyond its mandate.
His comments come as scrutiny intensifies over the role of politics in shaping U.S. monetary policy.
“Simply stated, Fed independence is largely up to the Fed,” Warsh said.
Warsh reiterated his commitment to tackling inflation, with his remarks placing far greater emphasis on price stability than on employment conditions. The balance between these dual mandates has been a focal point for policymakers in recent years.
A central theme of his speech was criticism that the Fed has expanded its remit into areas beyond its traditional scope, including climate change and social inequality.
“The Fed must stay in its lane. Fed independence is placed at greatest risk when it strays into fiscal and social policies where it has neither authority nor expertise,” he added.
Warsh was nominated in January by U.S. President Donald Trump to succeed current Federal Reserve Chair Jerome Powell, whose term is set to expire in May.
The nomination process has drawn attention to the relationship between the White House and the central bank, particularly given Trump’s past criticism of Fed policy.
Since the nomination was announced, questions have emerged over whether Warsh would be able to withstand political pressure from the administration, particularly calls to lower interest rates.
While emphasising the importance of independence, Warsh suggested that public commentary from elected officials does not necessarily undermine the Fed’s autonomy.
“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,” he said.
“Central bankers must be strong enough to listen to a diversity of views from all corners … humble enough to be open-minded to new ideas and new economic developments … wise enough to translate imperfect data into meaningful insight … and dedicated enough to make judgments faithfully and wisely.”
However, he acknowledged that the central bank’s independence may be more limited in areas outside monetary policy.
Warsh specifically pointed to oversight of public funds, referencing an ongoing investigation into the Federal Reserve’s multibillion-dollar headquarters renovation project.
“Fed independence is at its peak in the operational conduct of monetary policy. That degree of independence does not extend to the full range of its congressionally mandated functions. Fed officials are not entitled to the same special deference in their stewardship of public monies … or in bank regulatory and supervisory policy … or in areas affecting international finance, among other matters.”
The probe, being conducted by the U.S. attorney’s office in Washington, D.C., has complicated the leadership transition. Republican Senator Thom Tillis has indicated he will block the nomination from advancing until the investigation is resolved, while Powell has pledged to remain in his role until the matter is settled.
Despite these hurdles, administration officials remain confident that Warsh will ultimately secure confirmation.
During his presidency, Trump has repeatedly called for lower interest rates and has been openly critical of Powell’s leadership. He has also sought to remove Federal Reserve Governor Lisa Cook, with the case currently awaiting a decision from the Supreme Court regarding presidential authority over Fed appointments.
