New Federal Reserve Chair Kevin Warsh said this week that the central bank intends to stay independent of political pressure and keep fighting inflation, a stance that appears to rule out the interest rate cuts President Donald Trump has repeatedly demanded.
Warsh Draws a Line on Price Stability
Speaking at a central banking conference in Sintra, Portugal, Warsh told the audience that anyone expecting the Fed to tolerate inflation running above its 2% target should not hold their breath. "I guess they'd be disappointed," he said. "We're going to deliver price stability." The Fed's usual playbook for cooling inflation is raising borrowing costs, and Warsh gave no indication he plans to abandon that approach now that he holds the top job.
Asked directly about Trump's frequent calls for lower rates, Warsh made clear he sees the central bank's independence as untouchable. "We've been an independent central bank for a very long time," he said. "We're going to be an independent central bank at this moment and you're going to see no changes to that."
A Notable Shift Since Taking Over From Powell
Warsh took over as chair on May 22, replacing Jerome Powell, and his tone in Sintra marks a departure from where he stood only months earlier. Last year, while effectively campaigning for the chairmanship, Warsh argued for lower rates. Since stepping into the role, he has instead leaned toward prioritizing inflation control, a pivot that became evident again at his first press conference as chair last month, when he stressed the goal of steering inflation back toward the Fed's target.
Few Clues on the Fed's Next Moves
Warsh stopped short of laying out exactly how the Fed plans to attack inflation going forward. That reticence tracks with his long standing skepticism of "forward guidance," the practice of central bankers previewing their next policy steps to markets. "The tactics, the strategy, and the rest, that's still to come," he said in Sintra, leaving investors to read between the lines.
Markets are not betting on inflation alone shaping the path ahead. Wall Street investors currently anticipate the Fed could raise its benchmark interest rate as soon as September, moving it from roughly 3.6% today to about 3.9%. That expectation, paired with Warsh's public comments, suggests the central bank is bracing for a tighter stance rather than the rate relief the White House has pushed for.
What Warsh's Independence Pledge Means for Rate Watchers
The bigger question now is how long Warsh can hold this line if political pressure from the White House intensifies or if inflation data moves in unexpected directions. His remarks in Sintra were as much a message to markets as to the administration: the Fed under his leadership is not planning to soften its inflation fight to satisfy political demands, at least not yet.