🪙Warsh Era: Markets Tested, Bond Yields Spike • Federal Reserve News • Interest Rates Today • Hormuz

Added: 2026-05-21

[00:00:00]them and what are we doing about it?

[00:00:01]>> So we we have moved uh forward on that.

[00:00:05]Uh we have uh through the regulators had them uh double down on the KYC know your client and to make sure uh that everyone uh within the regulated banking system uh is is legal. Uh the other thing we have found out uh and we saw it in Minneapolis as the a hotbed of waste, fraud and abuse is outside of the banking system in money service businesses uh that a lot of money being wired out of the country. We don't know where. So this is a vulnerability we've spotted in in our system and we are cracking down on that.

[00:00:49]>> I've noticed that you said that uh if the Democrats win, they'll do it again.

[00:00:54]Uh can you clarify what that means? is we we saw a spending surge the during the Biden administration, a blow blowout spending and and again the the deficit to GDP numbers blowing out which according to MIT studies the spending was responsible for the inflation surge and at the same time we saw mass unfettered immigration 10 15 20 million illegal aliens coming into the country and depressing wages And a study from Wharton showed that much of the low-end housing inflation, especially in rents, came from the 20 million new arrivals. The law of supply and demand that applies both for uh housing and for suppressing wages >> about, you know, just the real cost that families are facing right now. And I appreciate that you were pushing back on that comment that the president had about calling the energy prices and the fuel price increases that we're having fake inflation because right now Americans have paid more than 8.4 billion dollars more in gas during the first year first month of this war.

[00:02:05]Fertilizer 70% of respondents to the Farm Bureau survey said that fertilizer is uh unable to be afforded right now just given the price increases. Are you concerned that there could be real long-term incre in long-term effects of this war in Iran? Uh, you know, especially if we're continuing to see these challenges when it comes to fuel and fertilizer.

[00:02:27]>> Uh, Senator, I if my reform agenda, if confirmed, stands for anything, it's for the central bank, especially the Fed chairman, to stay in its lane.

[00:02:36]>> I know that, but you >> So, I would want to wander outside of it. I'm happy.

[00:02:39]>> But you're also you're also charged with forecasting in terms of understanding where our economy is going. So does uh an impact of that magnitude rise to something that the Fed should keep an eye on and be concerned about?

[00:02:52]>> Uh the Fed should be have an open mind towards all sorts of data. But the things that central banks can affect are things that are not one-off in nature but are persistent and find their way into the generalized price level.

[00:03:03]>> And that's something I wanted to I wanted to ask you about that because you talked about a fundamental policy change when it comes to the Fed. And I guess I wanted to just get a little bit more clarity on that. You know, Senator Lumis mentioned about the balance sheet uh and the concern you have about that. Do what level do you think the balance should be at? You know, if it's 6.7 trillion now, where do you think the goal is in your mind?

[00:03:25]>> So, I haven't fixed a particular number, but any changes, Senator, in the balance sheet would be part of a public discussion debated rigorously. And if and when the central bank comes to a judgment about a new balance sheet policy, which I hope the central bank would, it would be described well in advance. As I mentioned, it took 18 years to create this balance sheet problem, and we won't be able to fix it in 18 minutes. And so that's why I think deliberation here is important, but it suffices to say, it should be smaller and at least as important. It should not be holding long-term Treasury assets as if it's the fiscal authority. That's when it gets into politics. I appreciate you saying that it's important to be able to have that public discussion. I mean, one thing that's come up as I've been engaged with different experts is concern about rapid reduction uh if you are moving in that speed that it could generate a number of concerns including upward pressure on long-term interest rates. So, I guess I just wanted to check. Do you share that concern, you know, as you are thinking about how to reduce it? Do you also understand though that there are concerns about rapid reduction in the speed with which you're trying to go down?

[00:04:31]>> Yes, senator. And that kind of regime change would have to be deliberate, well orchestrated, well um choreographed and well described so that uh unnecessary upset are not done to financial markets as we go to a policy regime change much more focused on interest rates.

[00:04:49]>> With that, I'll yield back.

[00:04:50]>> Thank you, sir. Senator Rickettts.

[00:04:53]>> Thank you, Mr. Chairman. Thank you, Mr. Waters. It was great to see you in my office. Thanks for coming by. I want to continue to talk about inflation because it is something that is incredibly important. You I think you share the view that inflation is a silent tax on American households. Is that accurate?

[00:05:09]>> Uh Senator, it's accurate. It's the most regressive tax that anyone in Washington could come up with. If you were trying to do the most harm to the least welloff among us, inflation would be the way to do it.

[00:05:21]>> Yeah. And my colleagues on the other side of the aisle have been talking about that. And I note, at least I don't recall that they ever talked about that during the Biden administration because it was during the Biden administration that we saw this record inflation, this 40-year-old high inflation. And yet my Democrat colleagues were silent about it back then. Now they want to talk about it. But of course, American households were hurting back then as well. Uh inflation was caused by President Biden's reckless policies and reckless spending. Let's look at ARPA, a b a a partisan bill that was passed by the Democrats, which cost taxpayers $1.9 trillion.

[00:06:00]When ARPA was passed in March of 2021, inflation was at 2.6%. Inflation quickly accelerated by it was over 5% by May, June, and July, and by the end of the year of December, it was 7%.

[00:06:13]Does federal government spending have anything to do with inflation, Mr. Walsh? Uh, Senator, uh, as we talked about in your office, my view of inflation is a bit different from some.

[00:06:25]I don't think inflation comes about when the economy grows too much or hardworking Americans get increase in their wages. I think inflation comes about when the government prints too much, by which I mean the central bank.

[00:06:36]And broadly speaking, the government spends too much.

[00:06:39]>> And so, we're spending too much money.

[00:06:40]And now we've been cleaning up their mess ever since. I will also note the Republicans have been taking efforts to reduce the deficit. I think year to date it's down about 10.6% from where it was last year or uh and this is why it's so important we get our spending under control. I think you also talked about the balance sheet and one of the things about the balance sheet is that I think if I hear you're saying it's too big and it benefits people who have financial assets but if you don't have financial assets you haven't seen the benefit of a a large balance sheet at the Fed. Is that accurate?

[00:07:17]uh Senator it's broadly accurate uh when the large balance sheet was created in the 2008 fin crisis the agreement between my colleagues and I was use this this in a emergency scenario because the transmission mechanism for a large balance sheet it goes two ways through signaling effects and through asset prices. Now at the time of the financial crisis, financial asset prices were down 60 or 70%. And so it was understandable interest rates were at zero. But in the ordinary course, the central bank, an independent body, should not be adopting a set of policies that have that kind of distributional consequence. That's why interest rates are a better way to be setting monetary policy. So if I I don't want to put words in your mouth, but just what I hear you saying is let's reduce the size of balance sheet because that benefits maybe half the American population. And then let's focus on interest rates and inflation so we can benefit all Americans. That if we take interest rates down that benefits all Americans, you said it gets into the nooks and crannies. That if we get inflation under control, that is how we benefit all Americans. And the size of the balance sheet has only benefited some Americans. So what you're really about is trying to change a policy at the Fed that has really benefited under the last administration people who have lots of money. Actually, not just the last administration, people the previous administrations. But you also want to make sure we get off of the inflation. I mean, during the Biden administration, we saw four years in a row of declining real wages for American households. And what you want to do is get that inflation under control so that all American households benefit. Is that fair?

[00:09:12]>> Uh, that is fair. Uh I'm going to paraphrase uh former chairman Paul Vulkar uh where he said something along the following lines. You would need to have a PhD from an elite institution to believe that inflation doesn't have something to do with money.

[00:09:29]>> Okay, great. Real briefly, I've only got a few seconds left here, but I'm going to hit upon switch topics on you real briefly. Uh, Chairman Pal and Secretary Basset met with leaders of our largest banks recently to talk about advanced AI models like Mythos from Anthropic to identify banking um vulnerabilities.

[00:09:47]It's apparently very good at finding those vulnerabilities. When confirmed, will you what will you do to modernize the Federal Reserve's internal risk assessments, tabletop or scenario planning exercises to ensure that we can anticipate and defend against the type of emerging risks that potentially models like Mythos could present if used in the wrong hands? have about 20 seconds to answer that.

[00:10:06]>> 20 seconds. Uh Senator, um uh a lot is the short answer. The 15-second answer beyond that is the pace of change in these technologies is accelerating. Uh AI, which I think of really is American ingenuity, gives America a huge head start relative to our uh competitors around the world, but it's not without real risks and real challenges. and a forward-looking reform oriented central bank needs to be on the front end of it.

[00:10:34]>> Great. Thank you very much. I look forward to your leadership.

[00:10:37]>> Senator Ggo, >> thank you, Mr. Chair.

[00:10:39]>> How are you?

[00:10:40]>> In uh 2019 interview with Bloomberg, you said monetary policy is important not for decision it makes but for reasons it gives for the explanations. Mr. Walsh, the Federal Open Market Committees or um that the Fed sets US monetary policy through interest rates decisions at those meetings. Do you commit to maintaining the current practice of holding a meeting at least once every eight weeks? Yes or no?

[00:11:02]>> Uh, Senator, by by statute, as we talked about in your office, I believe the statute requires a minimum of four meetings, but four is not enough. So, having more meetings than that is appropriate, but I've not even begun to look at the meeting schedules for 2027 and beyond. Uh, of course, subject to confirmation.

[00:11:19]>> So, then do you commit to holding a press conference at least on the day of the FOMC meetings? Uh, Senator, um, uh, right now press conferences are held periodically. If you ask me my true personal opinion, uh, right now Fed chairs and other central bankers around the FOMC, they speak quite frequently.

[00:11:40]There is no lack of transparency. But I would say this, I think truth seeeking is more important than repetition.

[00:11:48]Absolutely.

[00:11:48]>> If one has a press conference, one wants to deliver some important news. Perfect.

[00:11:53]Follow up on that. then would you commit to taking questions at those press conferences?

[00:11:57]>> Um I if a press conference were held, I think it would be incumbent to hear what uh the reporters of the day had in mind.

[00:12:04]>> Thank you. I'm glad you know our our personal meeting regarding this uh was very enlightening. Um earlier today you said to Senator Kenny that President Trump never demanded you to cut interest rates in your job interview. Is that your sworn testimony?

[00:12:18]>> That is Senator.

[00:12:19]>> Okay. Well, someone here is lying then.

[00:12:22]uh because it's either you or President Trump because in an interview with the Wall Street Journal of December 12th, President Trump confirmed that he pressed you on your commitment to support interest rates cuts and I quote during a 45minute meeting with WSH on Wednesday at the White House. The president pressed Walsh on whether he could trust him support interest rate cuts if he were chosen to lead the central bank. According to PIPA familiar with the meeting, Trump in the general interview confirmed that repeating uh Mr. Chairman, I'd like to enter for the record uh the Wall Street Journal article December 12th. Trump says he's leaning towards watch or has it to lead the Fed. So, you know, this brings up an issue of credibility at this point.

[00:13:03]Who's lying here? Is it you or the president? Because the president confirmed that he did ask you to cut interest rates.

[00:13:10]>> Uh Senator, there's of course a third alternative. You cite a couple of reporters for a leading financial newspaper. I recall reading that story at the time.

[00:13:20]>> Did you issue a correction?

[00:13:21]>> I think those reporters either need better sources or better journalista standards.

[00:13:26]>> Did you ask for a correction?

[00:13:29]>> There are things in the newspaper that I see all the time that don't strike my ear as correct.

[00:13:33]>> So, it is in your opinion that the president then is lying when he said he did not ask you. Uh I can only repeat to you Senator what I said to several of your colleagues.

[00:13:43]>> So you did not you right now under a sworn testimony are saying just to right now that the president of the United States in that job interview did not asked you to cut interest rates.

[00:13:54]>> The president never asked me to commit to interest rate cuts at any particular meeting over the period of my uh tenure at the Fed. He didn't ask for it. He didn't demand it. He didn't require it.

[00:14:06]And nor would I have ever done so. So, if these reporters come back and say to do another follow-up on this and they confirm what they heard, what will your response be?

[00:14:15]>> Well, my response would be what I suggest to you a few moments ago. Um, as I read that story in real time, I remember thinking they either need better journalistic standards or better sources.

[00:14:26]>> So, you know, here's my problem. Uh, Mr. Chair and colleagues, I, you know, and and Mr. Walsh, I think you're incredibly qualified. A lot of us are actually worried about the integrity of the Federal Reserve. We're worried about what this means for the economic markets and we're worried about what's this means for inflation. We're worried about your independence. And now we're hearing direct contradictions whether or not you were directly asked by the president to cut interest rates and you're saying no and he's saying yes. And I think for a lot of us there's a question now of credibility. And I think there's a real reason why uh many of us are not voting no. As a matter of fact, until you verbally spoke to Mr. Kennedy and answered his question that he did not answer ask the president did not ask you uh to cut interest rates. This was not even going to be brought up. So there's definitely right now a true question about who is lying here. It's either you or it's the president. I yield back.

[00:15:21]>> Senator, if I if I might respond.

[00:15:23]>> Certainly.

[00:15:23]>> Uh thank you. Uh I take my responsibility to be an independent leader of the Federal Reserve very seriously if confirmed by this body. I take the integrity of the office and my personal integrity very seriously. And um uh I I stand by every word I said.

[00:15:45]The president never asked me to commit to any such thing, nor would I ever do so.

[00:15:50]>> Mr. Banks?

[00:15:53]No sir.

[00:15:54]>> Thank you, Mr. Chairman. Governor Wars, congrats on your nomination. Uh, as we spoke about uh during our meeting in my office, I strongly support your nomination and look forward to voting for you to be the next chairman of the Federal Reserve Reserve and it can't happen soon enough. Um, one policy area that we strongly agree on is the threat that China poses to America's economy.

[00:16:16]In fact, you've written publicly that China is deliberately positioning its financial system to rival US leadership and actively working to elevate its currency on the global stage. Can you talk uh for a minute minute about how the Federal Reserve reinforces the strength of the US dollar as the world's uh reserve currency in the face of that challenge?

[00:16:37]>> Sure. Uh Senator, it's great great to see you again. We talked about some of these issues of the G2 rivalry, the rivalry between the US and China in your office. Uh if confirmed as chairman of the Federal Reserve, I will then have to say that it's the Treasury Secretary's business to talk about the dollar. It's the Fed chairman's business to talk about interest rates. Um but I think I can say this quite comfortably. Uh the dollar is the is the lynchpin of the global economy. The United States and the Federal Reserve is a beneficiary of the strength of the dollar. The US financial system is the most important financial system in the world and the central bank's been charged with really important responsibilities and overseeing it and supervising it. Um there are risks to the US position in the world including economic the economic statecraft agenda led by Secretary Bessant, Secretary Rubio is an important one on that. the Fed will play a supporting role in ensuring that the financial system is as safe as it can be and work with them because it's outside of the conduct of monetary policy to ensure the US is on its front foot and in a position of strength during this period of um rivalry between the US and uh another nation around the world.

[00:17:54]>> What what are some of those? I understand uh the role of the Treasury Department versus the Fed, but what are the most important steps that the Fed can take to reinforce confidence in the US dollar? uh deliver stable prices, Senator, uh deliver an economy that uh improves from here even further, where uh real take-home pay moves up, where inflation falls, and the US economic growth potential is the best in the world. I mentioned earlier, Senator something that I really do believe. Um AI is a testament to American ingenuity.

[00:18:29]the United States is the best positioned country in the world to take advantage of it so that the US economy, US workers benefit from it. Um that the US is in a better position than anyone else. But it's filled with challenges, geopolitical challenges, technology challenges. So the sooner that we can hit the ground running on reform agenda, the better.

[00:18:51]>> You you wrote in an op-ed in 2021 in the Wall Street Journal that I recommend everyone reads. It's one of the reasons that I wholeheartedly support you because of what you it says a lot about you in this op-ed. But you you talked about how the PRC is actively promoting its digital yuan currency with the explicit goal of creating an alternative payment system that sidesteps US sanctions. You've been very clear that China is not playing by the rules. China is buying over 80% of Iran's sanctioned oil in Chinese currency through Chinese banks completely outside Swift. The Iranian government says it is charging ships to transit the straight of Hermuz and collects payments via crypto and Chinese currency. What tools does the Federal Reserve have to defend the dollar's role as countries route payments through the Chinese financial systems to do business with Iran and other adversaries?

[00:19:45]>> Yeah, Senator, thank you. Um, as we talked about before, monetary policy is independent, but outside of monetary policy, the Federal Reserve can be working handinhand with the rest of the government. Um, the Federal Reserve is independent inside of government, not independent of government. Um, what the US can do with respect to the dollar is have a more robust uh, payment system.

[00:20:13]The Fed has a number of payment systems that most financial participants in the world use. I would say they all are in need of substantial reform. Uh there's a system called Fed Now, which some describe as Fed yesterday. There's a series of new technologies that the Fed needs to oversee and needs to architect so that the payment system in the US is the safest, most efficient uh uh most capable in the world. Otherwise, we'll be losing uh losing to adversaries around the world in being the lynch pin of the global economy.

[00:20:45]>> Thank you. Your your leadership is so important and it's important uh right now. We we need you on the job right