WASHINGTON (AP) — Donald Trump's nominee to lead the Federal Reserve pledged to fight inflation at a hearing Tuesday even as the president renewed his demands for interest rate cuts that could worsen it.
The comments underscore the challenges faced by Kevin Warsh, a former top Fed official whom Trump named in January to replace the current Fed chair, Jerome Powell. Trump has repeatedly attacked Powell for not cutting rates. Investors will be watching the hearing closely to see how Warsh balances Trump's demands for lower interest rates as the war in Iran pushes up the price of gasoline, adding to inflationary pressures that already exist.
Higher inflation typically leads the Fed to raise rates, or at least keep them unchanged, rather than cut them. When the Fed changes its key rate, it can affect mortgages, auto loans, and business borrowing.
Warsh told the Senate Banking Committee that one of this top goals would be to fight inflation, which remains elevated at 3.3% annually.
“Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish,” Warsh said. “Inflation is a choice, and the Fed must take responsibility for it.”
Trump was asked Tuesday in an interview on CNBC if he would be disappointed if Warsh didn't cut rates “right away” if confirmed.
Warsh would be in a tough spot if confirmed. Inflation is worsening as the Iran war has sent gas prices higher, making it much harder for the Fed to implement the interest rate cuts Trump so desperately seeks. The conflict could also slow the economy as well as hiring. And if Warsh ultimately becomes chair, he may very well find his predecessor, Jerome Powell, still sitting on the Fed’s governing board, an uncomfortable arrangement that hasn’t occurred since the late 1940s.
Warsh, a former top official at the Fed and a wealthy investor, faced a range of tough questions at the hearing. Democrats have raised the issue of what they see as a lack of transparency regarding some of his vast financial holdings, which total more than $100 million, according to a recent disclosure.
Warsh expressed support for the Federal Reserve's independence in his opening statement.
He said such political independence is “essential,” but he also said it wasn't threatened when “elected officials — presidents, senators, or members of the House — state their views on interest rates." Trump has repeatedly urged Powell to cut the Fed's key rate from its current level of about 3.6%.
Source: WPLG
