Nominated to the Fed, Warsh promises to respect the BC’s independence, but with limits

United States President Donald Trump’s nominee to head the Federal Reserve (Fed, the American central bank) is expected to tell parliamentarians, in a confirmation hearing scheduled for Tuesday (21), that he is “committed to ensuring that the conduct of monetary policy remains strictly independent.” The statements were contained in prepared comments seen by Reuters on Monday. 📱 Download the g1 app to see news in real time and for free Financier Kevin Warsh, 56 years old and former director of the Fed, will also tell members of the Senate Banking Committee that he intends to collaborate with the government and Congress on issues that do not directly concern monetary policy. “I am equally committed to working with the government and Congress on non-monetary issues that are part of the Fed’s mandate,” he will say. In prepared speeches, Warsh says that the independence of the central bank must be preserved especially in decisions on monetary policy. “This degree of independence does not extend to the full range of its congressionally mandated functions,” he said. According to him, those responsible for Fed decisions are not entitled to the same “special deference” on issues such as public resource management, banking regulation and supervision or issues linked to international finance. Changes at the Fed Appointed to replace the current Fed chair, Jerome Powell, Warsh also promises to promote changes at the institution. According to him, the tendency of large and complex organizations to maintain the status quo can be “harmful” in a scenario of rapid transformation. “At a time that will be among the most important in our nation’s history, I believe a reform-minded Federal Reserve can make a real difference for the American people,” he said. Warsh was director of the Fed between 2006 and 2011. In his speech, he revisits criticisms he has made of the central bank since leaving office. According to him, the Fed should “stay in its lane” and avoid advancing on issues it considers linked to fiscal or social policy. In the past, Warsh has used this expression to criticize central bank initiatives such as studies on the economic effects of climate change and the goal of “inclusive” full employment. In recent years, the Fed has significantly reduced its focus on the climate issue. Warsh also states that the central bank’s independence could be weakened if the institution does not fulfill its mandate to guarantee price stability, defined by Congress. “Low inflation is the Fed’s armor, its vital protection against the slings and arrows […] Therefore, when inflation rises — as it has in recent years — citizens suffer severe harm… (which) may also lose faith in our system of economic governance, raising doubts as to whether the independence of monetary policy is all it’s cracked up to be.” Warsh’s Senate confirmation hearing is scheduled to begin at 10 a.m. local time (11 a.m. GMT) on Tuesday. Kevin Warsh REUTERS/Brendan McDermid/File Photo

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