Warsh vows to keep doing the Fed's job despite Trump pressure

Kevin Warsh told House lawmakers he would "do my job" if Donald Trump kept attacking the Federal Reserve. He framed the issue around the Fed’s mandate, the Supreme Court’s recent protection of Governor Lisa Cook, and a June Consumer Price Index reading from the Bureau of Labor Statistics showing consumer prices rising at a 3.5% annual pace.

Warsh appeared before the House Financial Services Committee on July 14 as part of the Fed’s congressionally mandated semiannual Monetary Policy Report to Congress. In written testimony, he said the central bank’s obligations are tied to full employment and price stability, called Fed independence in conducting monetary policy "rightful," and told lawmakers the committee has "no tolerance for persistently elevated inflation." He said he had chaired his first Federal Open Market Committee meeting about a month earlier.

Trump continued to criticize the Fed and pressed his case for lower rates. Warsh did not give a clear signal on the next policy move, but he made clear that the White House will not set the central bank’s agenda. He said his focus was the "inflation surge of the last five years," calling high inflation an "undue burden" on households and businesses. He also said the Fed’s 2020 flexible inflation targeting framework was a mistake and called the agenda a "regime change" in policy, with five task forces examining communications, technology, the balance sheet, economic data and the Fed’s approach to inflation.

On June 29, the Supreme Court blocked Trump’s attempt to fire Cook, the first time in the Fed’s history that a governor was the target of a firing attempt. The court said the Fed’s for-cause protection is different from at-will employment, and Chief Justice John Roberts wrote that accepting Trump’s theory would be out of step with Congress’s tradition of insulating central banking from political interference. Cook said Trump’s move was a manufactured pretext because she refused to bow to political pressure and continued setting rates based on what would best serve the public.

Warsh gave identical remarks to the Senate Banking, Housing, and Urban Affairs Committee on July 15. He also tied his testimony to the Federal Reserve Act and the framers, invoking Alan Greenspan, who appeared before Congress more than 200 times.