\n In his exchanges with House lawmakers on Tuesday, Warsh provided new details on how the task forces will present their findings. He was also pressed repeatedly on his views about the Fed\u2019s political independence, the potential economic impact of AI and the lessons he drew from serving as a Fed governor during the 2008 global financial crisis.\n <\/p>\n
\n Here are key takeaways from Warsh\u2019s first congressional testimony, as policymakers navigate stubborn inflation and mounting geopolitical risks:\n <\/p>\n
\n In his post-meeting news conference last month, Warsh announced task forces that will study and give recommendations on improving the following areas related to US monetary policymaking: communications; balance sheet policy; economic data; productivity and jobs; and inflation frameworks.\n <\/p>\n
\n On Tuesday, Warsh said the task forces will share their findings \u201cfirst with the decision makers,\u201d who are the 19 members of the Federal Open Market Committee, the Fed group that sets interest rates. Then Warsh himself will present that to the public.\n <\/p>\n
\n Warsh also explained that any proposed policy changes to the Fed\u2019s $6.7 trillion balance sheet will be telegraphed to the public before any actual changes are made.\n <\/p>\n
\n \u201cIf there were a change in balance sheet policy, we would preview it, explain it, debate it, and no changes in balance sheet policy would happen without good advance notice to the likes of this committee and broadly, financial markets,\u201d Warsh said.\n <\/p>\n
\n The Fed\u2019s balance sheet became a major monetary policy tool during the Great Recession, when the central bank bought massive quantities of Treasuries and mortgage-backed securities to support the economy. Critics argue the expansion has pushed the central bank beyond its traditional remit.\n <\/p>\n
\n Warsh was pressed several times as to whether he believes in the Fed\u2019s ability to set interest rates without political interference.\n <\/p>\n
\n Democratic Rep. Nydia Vel\u00e1zquez of New York asked Warsh if he works for Trump, to which the Fed leader responded: \u201cWe\u2019re an independent central bank.\u201d\n <\/p>\n
\n \u201cWe\u2019re honored to be independent,\u201d he told Vel\u00e1zquez. \u201cOutside the four walls of the Federal Reserve, there\u2019s no doubt a lot of politics.\u201d\n <\/p>\n
\n He reiterated that view in an exchange with Democratic Rep. Gregory Meeks of New York, who pressed Warsh on how he would respond if Trump \u201cpublicly pressures you to pursue a different course\u201d than that warranted by economic data.\n <\/p>\n
\n \u201cMy commitment to you is to follow the law and follow the data. Follow our very best judgment,\u201d Warsh responded.\n <\/p>\n
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Fed Chairman Warsh questioned about independence from Trump\n <\/p>\n
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Fed Chairman Warsh questioned about independence from Trump<\/p>\n
1:39<\/p>\n
\n Warsh\u2019s commitment to being independent continues to face scrutiny. The president last year waged an aggressive pressure campaign against the central bank in an effort to force lower interest rates. During the search for the next Fed chair, Trump said he expects his appointee to push for lower rates. Warsh maintains that he made no such promise to the president and will act independently.\n <\/p>\n
\n Warsh pointed to the ongoing AI infrastructure buildout as a powerful force shaping the US economy, though he acknowledged that much of its economic impact remains uncertain.\n <\/p>\n
\n \u201cWe don\u2019t know the extent to which the economy will benefit from the AI buildout,\u201d Warsh said in his opening remarks. \u201cYet it seems inevitable that what is now called \u2018AI investment\u2019 will soon be called just \u2018investment.\u2019\u201d\n <\/p>\n
\n In an exchange with Republican Rep. Bryan Steil of Wisconsin, Warsh made it clear that he\u2019s bullish on AI\u2019s potential benefits for the US economy and society in general.\n <\/p>\n
\n \u201cLike previous positive technology shocks, the US will be richer, will be more productive, there\u2019ll be more labor, there\u2019ll be more wage compensation,\u201d Warsh said. \u201cThis is probably the biggest change in my adult lifetime, because it\u2019s not just the creation of a new widget.\u201d\n <\/p>\n
\n \u201cWhat it\u2019s changing is the method of innovation and the speed of innovation, and I can\u2019t think of a country on earth as well positioned to take advantage of it,\u201d he added, though he also recognized \u201cit might be disruptive in the near term.\u201d\n <\/p>\n
\n Warsh reflected on his time as a Fed governor from 2006 to 2011 and the lessons he learned as the US economy descended into the worst recession since the Great Depression.\n <\/p>\n
\n \u201cI still have the scars from the 2008 crisis,\u201d Warsh said.\n <\/p>\n
\n The Fed chief said he learned of the importance of collaborating with other regulators and stewards of the US economy in times of crises, particularly the Treasury secretary.\n <\/p>\n
\n \u201cThe Treasury secretary and the Fed chairman, they often had to work in tandem,\u201d he said. \u201cIt\u2019s hard to distinguish in crisis times, separate from more benign times, exactly where those roles and responsibilities are.\u201d\n <\/p>\n
\n At the time, the Fed turned to large-scale asset purchases to beef up its portfolio in an effort to inject liquidity in the financial system and encourage lending when interest rates were already near zero. That policy became known as \u201cquantitative easing,\u201d or QE. Warsh initially supported the Fed\u2019s response, but later resigned after raising concerns about additional rounds of asset purchases.\n <\/p>\n
\n On Tuesday, Warsh said the Fed is revisiting that approach through one of the task forces.\n <\/p>\n
\n \u201cThe Fed balance sheet, both its size and duration, are worthy of a very worthwhile review,\u201d he said. \u201cI\u2019m inclined to think that there are better regimes we can go to, but we\u2019re not going to do it without due consultation with the markets and with members.\u201d\n <\/p>\n
\n In 2019, when the Fed was shrinking its balance sheet, the cushion of reserves available in the banking system dropped, leading to a spike in overnight lending rates that forced the central bank to step in and add liquidity back into markets. That episode highlighted the challenges of managing a much larger portfolio.\n <\/p>\n","protected":false},"excerpt":{"rendered":"Washington\u00a0\u2014\u00a0 Federal Reserve Chairman Kevin Warsh on Tuesday offered his most detailed account yet of the sweeping changes…\n","protected":false},"author":2,"featured_media":802125,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":["post-802124","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/802124","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=802124"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/802124\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/802125"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=802124"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=802124"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=802124"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}