Latest news with #Warsh
Business Times
10-05-2025
- Business
- Business Times
Ex-Federal Reserve's Warsh highlights a path to lower rates, takes a fresh dig at the Fed
[PALO ALTO, California] Kevin Warsh, an apparent frontrunner to be US President Donald Trump's pick to be the next chair of the Federal Reserve, on Friday suggested a possible pathway to the lower policy rates that Trump has repeatedly pressed the current Fed Chair Jerome Powell to deliver, and delivered a fresh dig at the Fed's conduct of monetary policy. A large and often growing Fed balance sheet can work at cross-purposes with the Fed's main policy lever of setting short-term borrowing rates, Warsh told a monetary policy panel at Stanford University's Hoover Institution, but 'if the printing press could be quiet, we could have lower policy rates.' Warsh served as Fed Governor from 2006 until 2011, when he quit because he opposed the Fed's continued balance sheet expansion as central bank overreach that encouraged the expansion of the nation's debt. The Fed is currently reducing its balance sheet. On Friday, Warsh offered an added criticism of the Fed, saying there is no 'cruel choice' between the Fed's two objectives of stable prices and full employment, a reference to the idea long prevalent among many central bank policymakers that the cost of bringing down inflation is harm to the job market. 'What it means is, we don't have to push the unemployment rate up to get the inflation rate to fall,' Warsh said on the sidelines of the conference. 'At the Fed, when they talk about how we get inflation down, what they really mean is, how do we get the unemployment rate up ... we need to throw people out of work to get the inflation rate to come down, which is nonsense. But that's embedded in economic thinking, including at the Fed.' The idea that a 'cruel choice' is 'nonsense' is actually largely consistent with how the Fed has conducted policy over the last several years, as it brought inflation down from 40-year highs without pushing the unemployment rate above the rate that most economists feel is consistent with full employment. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Powell has repeatedly said he does not feel the current labour market is a source of inflation, suggesting that crushing the job market would do little to lower inflation. Warsh made his remarks at a conference and an institution steeped in Bush-Reagan Republicanism, now out of favour as Trump and his ideas have come to dominate the party. The conference was convened in part to celebrate John Taylor, a Bush economic adviser and author of one of the most famous monetary policy rules. Condoleezza Rice, Bush's Secretary of State, spoke on Thursday. Warsh himself was a Bush appointee to the Fed but also has close family ties to Trump through his wife - the daughter of Trump's former donor Ronald Lauder. He shared the stage on Friday with Fed Governor Christopher Waller, a Trump appointee who has also been mentioned as a possible candidate for Fed chair. Waller has said he's prepared to lower rates swiftly should tariffs drive a slowdown in the economy and send the unemployment rate upward. Asked what the Fed should do now, if its inflation and employment mandates come into tension, Warsh demurred. 'Well, that's a longer discussion,' he said, heading back into the conference to hear the next speakers. REUTERS
Business Times
09-05-2025
- Business
- Business Times
Ex-Fed's Warsh highlights a path to lower rates, takes a fresh dig at the Fed
[PALO ALTO, California] Kevin Warsh, an apparent frontrunner to be US President Donald Trump's pick to be the next chair of the Federal Reserve, on Friday suggested a possible pathway to the lower policy rates that Trump has repeatedly pressed the current Fed Chair Jerome Powell to deliver, and delivered a fresh dig at the Fed's conduct of monetary policy. A large and often growing Fed balance sheet can work at cross-purposes with the Fed's main policy lever of setting short-term borrowing rates, Warsh told a monetary policy panel at Stanford University's Hoover Institution, but 'if the printing press could be quiet, we could have lower policy rates.' Warsh served as Fed Governor from 2006 until 2011, when he quit because he opposed the Fed's continued balance sheet expansion as central bank overreach that encouraged the expansion of the nation's debt. The Fed is currently reducing its balance sheet. On Friday, Warsh offered an added criticism of the Fed, saying there is no 'cruel choice' between the Fed's two objectives of stable prices and full employment, a reference to the idea long prevalent among many central bank policymakers that the cost of bringing down inflation is harm to the job market. 'What it means is, we don't have to push the unemployment rate up to get the inflation rate to fall,' Warsh said on the sidelines of the conference. 'At the Fed, when they talk about how we get inflation down, what they really mean is, how do we get the unemployment rate up ... we need to throw people out of work to get the inflation rate to come down, which is nonsense. But that's embedded in economic thinking, including at the Fed.' The idea that a 'cruel choice' is 'nonsense' is actually largely consistent with how the Fed has conducted policy over the last several years, as it brought inflation down from 40-year highs without pushing the unemployment rate above the rate that most economists feel is consistent with full employment. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Powell has repeatedly said he does not feel the current labour market is a source of inflation, suggesting that crushing the job market would do little to lower inflation. Warsh made his remarks at a conference and an institution steeped in Bush-Reagan Republicanism, now out of favour as Trump and his ideas have come to dominate the party. The conference was convened in part to celebrate John Taylor, a Bush economic adviser and author of one of the most famous monetary policy rules. Condoleezza Rice, Bush's Secretary of State, spoke on Thursday. Warsh himself was a Bush appointee to the Fed but also has close family ties to Trump through his wife - the daughter of Trump's former donor Ronald Lauder. He shared the stage on Friday with Fed Governor Christopher Waller, a Trump appointee who has also been mentioned as a possible candidate for Fed chair. Waller has said he's prepared to lower rates swiftly should tariffs drive a slowdown in the economy and send the unemployment rate upward. Asked what the Fed should do now, if its inflation and employment mandates come into tension, Warsh demurred. 'Well, that's a longer discussion,' he said, heading back into the conference to hear the next speakers. REUTERS
Yahoo
09-05-2025
- Business
- Yahoo
Ex Fed's Warsh highlights a path to lower rates, takes a fresh dig at the Fed
By Ann Saphir and Howard Schneider Palo Alto, California (Reuters) -Kevin Warsh, an apparent frontrunner to be U.S. President Donald Trump's pick to be the next chair of the Federal Reserve, on Friday suggested a possible pathway to the lower policy rates that Trump has repeatedly pressed the current Fed Chair Jerome Powell to deliver, and delivered a fresh dig at the Fed's conduct of monetary policy. A large and often growing Fed balance sheet can work at cross-purposes with the Fed's main policy lever of setting short-term borrowing rates, Warsh told a monetary policy panel at Stanford University's Hoover Institution, but "if the printing press could be quiet, we could have lower policy rates." Warsh served as Fed Governor from 2006 until 2011, when he quit because he opposed the Fed's continued balance sheet expansion as central bank overreach that encouraged the expansion of the nation's debt. The Fed is currently reducing its balance sheet. On Friday, Warsh offered an added criticism of the Fed, saying there is "cruel choice" between the Fed's two objectives of stable prices and full employment, a reference to the idea long prevalent among many central bank policymakers that the cost of bringing down inflation is harm to the job market. "What it means is, we don't have to push the unemployment rate up to get the inflation rate to fall," Warsh said on the sidelines of the conference. "At the Fed, when they talk about how we get inflation down, what they really mean is, how do we get the unemployment rate need to throw people out of work to get the inflation rate to come down, which is nonsense. But that's embedded in economic thinking, including at the Fed." The idea that a "cruel choice" is "nonsense" is actually largely consistent with how the Fed has conducted policy over the last several years, as it brought inflation down from 40-year highs without pushing the unemployment rate above the rate that most economists feel is consistent with full employment. Powell has repeatedly said he does not feel the current labor market is a source of inflation, suggesting that crushing the job market would do little to lower inflation. Warsh made his remarks at a conference and an institution steeped in Bush-Reagan Republicanism, now out of favor as Trump and his ideas have come to dominate the party. The conference was convened in part to celebrate John Taylor, a Bush economic adviser and author of one of the most famous monetary policy rules; Condoleeza Rice, Bush's Secretary of State, spoke on Thursday. Warsh himself was a Bush appointee to the Fed but also has close family ties to Trump through his wife -- daughter of Trump former donor Ronald Lauder. He shared the stage Friday with Fed Governor Christopher Waller, a Trump appointee who has also been mentioned as a possible candidate for Fed chair. Waller has said he's prepared to lower rates swiftly should tariffs drive a slowdown in the economy and send the unemployment rate upward. Asked what the Fed should do now, if its inflation and employment mandates come into tension, Warsh demurred. "Well, that's a longer discussion," he said, heading back into the conference to hear the next speakers. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
04-05-2025
- Business
- Forbes
Kevin Warsh Is Viewed As A Future ‘Adult' At The Fed. That's Dangerous
WASHINGTON, DC - APRIL 18: Jon Hilsenrath, Author, chats with Adam Posen, President, Peterson ... More Institute, Kevin Warsh, Former Member, Federal Reserve Board of Governors; and Karen Karniol-Tambour, Co-CIO, Bridgewater at The Semafor 2024 World Economy Summit on April 18, 2024 in Washington, DC. (Photo byfor Semafor) High prices beget low prices. It's the high prices that summon more supply, more innovative production processes that ultimately result in lower prices, and often both. That high prices foretell lower prices rates more discussion as Republicans and conservatives rush to anoint former Fed Governor Kevin Warsh as the next Fed Chairman. They seemingly view Warsh as another 'adult' with whom they have history with in the Trump economic room, while Warsh likely fits Trump's preference for good-looking people. Ok, but what about Warsh the economic theorist? This is the real danger associated with Warsh that happy-talking conservatives don't seem willing to acknowledge, or grasp. Warsh is an interventionist by his own admission. He still defends his former Fed boss Ben Bernanke's 'try everything' response to financial uncertainty in 2008. Warsh also defends the Fed's 'quantitative easing' efforts in 2008-2009 meant to push down interest rates. If we forget for a moment that the Fed can't alter reality opposite Bernanke and others who buy into (and practiced) central-banking mysticism, stop and think about what it signals about Warsh that he thinks otherwise: it's a sign that he's fully willing to substitute himself for the information-pregnant marketplace when it's sending crucial signals. Lest readers forget, prices are how the market economy organizes itself, yet Warsh thinks it's alright for government officials to intervene when market prices are communicating what they don't like. Here lies the danger of 'adults' like Warsh, and arguably 'free market' Republicans more broadly. Just as hardline anti-communist hardliner Richard Nixon could go to China, Republicans can meddle with markets. That's the stuff of crises. More on this in a bit. For now, it's useful to contemplate the speech Warsh gave last week and that had conservatives rapturous. In one editorial Warsh was lionized for observing that the Fed 'has undermined its own credibility in recent years by failing to fulfill its core duty of providing price stability.' Really? Market prices, much like credit prices, are an effect of wildly sophisticated cooperation among man and machine (we don't borrow money, we buy what money can be exchanged for) around the world, and the infinite prices of either could never, ever be managed or overseen by central bankers. From there, Warsh promoted the fiction that the quantitative easing he initially supported ultimately 'disguised the true cost of capital,' and the latter allegedly 'subsidized government deficit spending by keeping the cost of borrowing artificially low.' No, that's not serious. Just the same, it's remarkable the veiled disdain conservatives have for the market signals they claim to embrace. Seriously, do they really believe the deepest markets in the world in which are traded the most owned assets in the world (Treasuries) were really tricked by men and women with last names like Bernanke, Yellen, and Powell on the way to much easier borrowing than would have taken place if markets hadn't been duped? Hopefully the question answers itself. Contra Warsh, the danger isn't that the Fed can trick markets and control credit prices (what a laugh), it's Warsh himself. It's that conservatives view him as their adult in the room. Except that Warsh joined with other adults in 2008 to intervene in a healthy correction, one that logically included financial institution failure, and that if left alone would have taken place absent what some who should know better claim to this day was a 'financial crisis.' No, no such thing. Markets just are. They're a mirror. The only crisis is one of intervention, and the adult in Warsh situationally embraces intervention. Which is the stuff of crises by its very name.
Reuters
25-04-2025
- Business
- Reuters
Former Fed governor Warsh says US central bank should change its ways
WASHINGTON, April 25 (Reuters) - Former Federal Reserve Governor Kevin Warsh, with whom President Donald Trump is reported to have discussed firing U.S. central bank chief Jerome Powell and installing him in his place, on Friday unleashed a barrage of criticism of the Fed and argued for fundamental changes to how it operates. While saying he believes in the "operational independence" of the Fed, Warsh told a conference in Washington organized by the Group of Thirty, an international body of financiers and academics, he believes the Fed has gone beyond its remit and undermined its own claims to independence. He urged the Fed to stop relying on "data dependence" to guide its decisions, and on forward guidance to let the public know where rates may be headed. And he blamed the central bank for aiding the expansion of the U.S. national debt and for allowing inflation to surge after the COVID-19 pandemic. "Fed claims of independence in bank matters undermine the case for independence in the conduct of monetary policy," Warsh said. "And when the Fed turns away from its creed and tradition, exercising powers that are the province of the Treasury Department, or taking positions on societal issues, it further jeopardizes its operational independence in what matters most." NERVOUS MARKETS Trump has repeatedly criticized Powell for not cutting interest rates since the Republican president took office in January. His escalating rhetoric against the Fed chief, along with hints he might try to remove him, triggered on Monday a selloff on financial markets that were already under pressure from fears that Trump's sweeping tariffs could send the U.S. economy into a recession. Trump has since said he has no intention of firing Powell and also appears to have backed off his aggressive trade war with China. The Wall Street Journal reported that Trump has privately been talking about firing Powell for months, discussing the possibility with Warsh as recently as February. The WSJ said Warsh advised the president to leave Powell as Fed chief until his term expires in May 2026. Trump's interest in having Warsh, a Republican who served in former President George W. Bush's administration and previously worked for Morgan Stanley, take over the top Fed job dates to his first term as president, when he ended up picking Powell instead to replace Janet Yellen. The president soon soured on Powell, railing publicly about too-high interest rates. In 2020, he called out Warsh at a White House signing of a China-U.S. trade pact and said he "would have been very happy, opens new tab" to have him heading the Fed instead of Powell. Warsh, currently a visiting fellow at Stanford University's Hoover Institution and an advisor to the Duquesne Family Office LLC, was a Fed governor from February 2006 to April 2011, leaving about a year before Powell became a governor. During his tenure at the Fed, Warsh was frequently an advocate for tighter, not easier, monetary policy and criticized the Fed's expansionary balance sheet policy. While stating the Fed must maintain monetary policy independence, Warsh also has argued it should not overstep its financial stability role to rescue banks, and should not expect autonomy for other functions, opens new tab, including regulatory policy or consumer protections. Treasury Secretary Scott Bessent has said the administration will start interviewing candidates for the top Fed job in the fall.
