New Fed Chair Kevin Warsh has "difficult job in front of him," expert says

Añadido: 2026-05-23

[00:00:00]So, let's go back to that issue, those kitchen table issues, the the economy, right? And somebody who will have a large say in the future of our economy is the man who's now been sworn in, Kevin Warsh, to lead the Fed. So, live now to Senator to John Hilzenrath. He's visiting scholar at Duke University to talk about that. So, millions of Americans, as we've talked about, they're facing tough times. Gas prices, it's expensive to fly or to travel going into Memorial Day holiday. The president is signaling better days ahead under Mr. Warsh, but do you think Warsh will tow the line on things like interest rates?

[00:00:34]Well, the new Fed chairman has a difficult job in front of him, right?

[00:00:39]Because inflation has risen, the Fed has a target of 2% annual inflation. It's now over 3%, close to 4%.

[00:00:49]The playbook says that when inflation is rising, the central bank raises interest rates. And that, of course, puts a new burden on American households. It raises the cost of mortgages and credit cards, and potentially slows down a housing market that's already been pretty slow.

[00:01:07]So, I think Kevin Warsh took the job hoping, thinking he might be able to cut interest rates, but now because inflation is rising, the market is pricing in a rising likelihood that the Fed is actually going to be raising interest rates at some point over the next year.

[00:01:25]Well, and you know, we've heard President Trump take a lot of swipes at Jerome Powell, the man that Mr. Warsh is going to replace, over that interest rate matter. That raised the concern that the president wanted to have his thumb on the scale of the Federal Reserve, which has always been independent. But then you saw the president say to Mr. Warsh during his swearing in, "Look, I want you to stay independent."

[00:01:48]So, how does that square?

[00:01:51]You know, well, so it might be a case of be careful what you wish for, right? So, the president President Trump has been saying for since he was he was sworn in a year and a half ago that he wanted the Fed to be cutting interest rates. It just so happens the Fed has cut interest rates.

[00:02:09]It cut rates by 3/4 of a percentage point last year. But, the problem is if the Fed cuts rates too much, that could cause even more inflation.

[00:02:19]And what happens is if you if you get more inflation is eventually those interest rates rise. So, the president might now be in a position of saying, "All right, listen, I'm going to stop telling the Fed to cut rates. They're just going to do what they have to do because higher inflation isn't in anybody's interest. It's not in the interest of the American public, and it's also not in the interest of the Republican Party because we've got midterm elections coming up, and if people are angry because their cost of living is rising, they're going to take it out on the the party in power." Uh so, you know, I think what we might be seeing is a shift in the president's stance, you know, taking his kind of foot off the scale of saying cut cut cut rates because we might be in a position where we can't cut rates anymore because it's feeding this inflation problem that people are feeling in their pocketbooks and at the gas pump every day. So, Kevin Warsh won't be making these decisions by himself, and it bears mentioning that former Fed Chair Jerome Powell will still be a voting member of the board.

[00:03:23]Do you anticipate some friction on that board?

[00:03:26]Uh yeah, that you know, we've actually been seeing a lot of friction over the last several months, and it's not just the former Fed Chairman Jay Powell, but the Fed has an odd structure. There are regional bank presidents, presidents of central of Federal Reserve banks in places like Cleveland and Boston and San Francisco and Chicago, and they have some input into the decisions that the Fed makes about rates. And then there are seven board members in Washington.

[00:03:55]Uh Kevin Warsh is just one of seven board members. The Fed is a very consensus-driven organization. So, the new chairman, Jay Powell, like the old chairman and the chairman who preceded them, have to get all of these different people to agree on the policy. And what we've seen in meetings over the last few months is an increasing level of dissent. Four dissents at the last meeting because of this friction that we've been talking about. Well, wait, interest rates are inflation I'm sorry, inflation is rising. Maybe we shouldn't be cutting interest rates anymore. Maybe it's time to raise rates. We need to be talking about these things. So, I think uh the new chairman, Kevin Warsh, is moving into a situation where there's going to be a lot of disagreement among his colleagues about how to proceed and also when to proceed. Jon Hilsenrath, thank you so much for that discussion. It'll be fascinating to see what happens in the next quarter here in our country.