{"id":458901,"date":"2026-02-07T03:14:19","date_gmt":"2026-02-07T03:14:19","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/458901\/"},"modified":"2026-02-07T03:14:19","modified_gmt":"2026-02-07T03:14:19","slug":"kevin-warshs-ode-to-central-bank-independence-portends-his-vision-as-fed-chair","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/458901\/","title":{"rendered":"Kevin Warsh\u2019s ode to central bank independence portends his vision as Fed chair"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Kevin Warsh attends the Sohn Investment Conference in New York in May, 2017.Brendan McDermid\/Reuters<\/p>\n

Back in the spring of 2010, Kevin Warsh penned \u201cAn Ode to Independence<\/a>\u201d for the U.S. Federal Reserve.<\/p>\n

Mr. Warsh is now U.S. President Donald Trump\u2019s nominee to become the central bank\u2019s next chair. But when he delivered that oratory, he was still a member of the Board of Governors of the Federal Reserve System.<\/p>\n

\u201cThe Fed is not independent from government. It is independent within government,\u201d Mr. Warsh told the Shadow Open Market Committee, an organization of independent economists that critiques the Fed\u2019s policy decisions, stressing there is a \u201cmisconception\u201d about the nature of the central bank\u2019s authority.<\/p>\n

\u201cAnd elected representatives have every right to redraw the central bank\u2019s authority, even if a fuller reading of economic history considers it unwise.\u201d<\/p>\n

Some 16 years later, that discourse portends Mr. Warsh\u2019s potential vision for reforming the Fed and resetting its relationship with the Trump administration. As he explained during that address, the Fed must demonstrate its independence, not just declare it. <\/p>\n

\u201cCentral bankers err if they presume that independence is some inalienable right, some entitlement,\u201d he added.<\/p>\n

Bessent refuses to offer opinion on Trump\u2019s authority to fire Fed officials<\/a><\/p>\n

The U.S. Senate still needs to confirm Mr. Warsh as the successor to outgoing Fed Chair Jerome Powell. But in recent months, Mr. Warsh has made strident comments about the Fed\u2019s \u201ccredibility deficit<\/a>\u201d under Mr. Powell\u2019s leadership.<\/p>\n

There are mixed predictions<\/a> about whether Mr. Warsh will actually shake up the storied institution as much as he intimated in those comments. After all, there is a world of difference between offering analysis and doing the job itself.<\/p>\n

Still, Mr. Warsh has made it clear that he believes the Fed needs to go back to the future on monetary policy because it has strayed too far from its mandate. In doing so, he has linked the central bank\u2019s independence to its institutional credibility. <\/p>\n

\u201cWhat we need is regime change at the Fed, and that\u2019s not just about the chairman, it\u2019s about a range of people,\u201d Mr. Warsh said last July, according to published reports<\/a>, including a story by The Wall Street Journal<\/a>. \u201cIt\u2019s about breaking some heads.\u201d<\/p>\n

That\u2019s not the banter that one expects from a Fed chair candidate. But Mr. Warsh believes that central bankers \u201ccan ill-afford\u201d to be anything but straight shooters.<\/p>\n

Mr. Warsh, though, is a paradox. He is known for being an \u201cinflation hawk\u201d but also appears to share Mr. Trump\u2019s desire to lower short-term interest rates \u2013 even though inflation is still above the Fed\u2019s 2 per cent target. <\/p>\n

But with the Fed\u2019s independence under constant attack by Mr. Trump \u2013 Mr. Powell and Fed Governor Lisa Cook are facing criminal investigations \u2013 Mr. Warsh needs to make clear if he is an institutionalist.<\/p>\n

He has mused about creating a new Treasury-Fed accord<\/a> to reduce the size of the central bank\u2019s balance sheet to put downward pressure on long-term rates. Key to his proposal is that Treasury Secretary Scott Bessent would have considerable sway<\/a> over that process.<\/p>\n

Mr. Warsh has also expressed the view that the Fed needs to move away from \u201cdata dependence<\/a>\u201d and potentially reduce its focus on certain factors, such as tariffs.<\/p>\n

Investors bet on steeper yield curve under incoming Fed chief Warsh<\/a><\/p>\n

But considering that he has criticized Mr. Powell for consistently missing the mark on interest rates, the Fed\u2019s independence rests on Mr. Warsh not ignoring the data. The last time inflation was below the Fed\u2019s target was in February of 2021.<\/p>\n

Of course, the Fed\u2019s credibility matters to Canadians, too. <\/p>\n

Bank of Canada Governor Tiff Macklem welcomes Mr. Warsh\u2019s nomination and has not commented on Mr. Warsh\u2019s prospective plans for the Fed. <\/p>\n

Mr. Macklem remains a vocal supporter of the Fed\u2019s independence.<\/p>\n

\u201cThe Federal Reserve, it\u2019s the most important central bank in the world, and we all need the Fed to work well,\u201d Mr. Macklem said on Thursday at the Empire Club of Canada. \u201cOur financial markets in Canada are very integrated with U.S. financial markets.\u201d<\/p>\n

A loss of independence would result in a less predictable Fed, and that would affect U.S. interest rates, he said. For instance, movements in the five-year U.S. Treasury interest rate could affect the yield on the corresponding Government of Canada bond, which influences borrowing rates for business loans and consumer mortgages.<\/p>\n

\u201cCentral banks with operational independence for monetary policy; they do a better job of delivering price stability for their citizens,\u201d Mr. Macklem said.<\/p>\n

\u201cI spoke out because I believe that Chairman Powell has been doing a good job guiding the FOMC based on evidence, based on economic judgments, not on politics, and it is important that that continues,\u201d he said, referring to the Federal Open Market Committee.<\/p>\n

Amen to that.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Kevin Warsh attends the Sohn Investment Conference in New York in May, 2017.Brendan…\n","protected":false},"author":2,"featured_media":458902,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,5152,46],"class_list":["post-458901","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-dei","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/458901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=458901"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/458901\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/458902"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=458901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=458901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=458901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}