Kevin Warsh, President Donald Trump’s pick to lead the Federal Reserve, will pledge to defend the central bank’s independence at his confirmation hearing, according to testimony prepared for the event.
Warsh’s testimony doesn’t mention lowering interest rates, as Trump has sought.
Warsh, a 56-year-old former Fed governor, will tell lawmakers on the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday that “monetary policy independence is essential,” according to prepared testimony that was leaked on Monday. Still, he calls for reform at the Fed and says independence is most threatened when the central bank pushes beyond the remit of its congressional mandate.
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“In sum, I believe that monetary policy independence is earned—and better policy decisions crafted—by steering clear of distractions,” Warsh will say. “I am committed to ensuring that the conduct of monetary policy remains strictly independent. I am equally committed to working with the administration and Congress on non-monetary matters that are part of the Fed’s remit.”
Current Fed Chairman Jerome Powell has faced immense pressure from the White House to lower interest rates. Notably, in his testimony, Warsh does not mention any plans to push for lower rates, but will certainly face questions on the matter.
In his testimony, Warsh says that politicians, including Trump, weighing in on interest rate policy is not necessarily a threat to Fed independence.
“I do not believe the operational independence of monetary policy is particularly threatened when elected officials—presidents, senators, or members of the House—state their views on interest rates,” the testimony reads.
“Central bankers must be strong enough to listen to a diversity of views from all corners … humble enough to be open-minded to new ideas and new economic developments … wise enough to translate imperfect data into meaningful insight … and dedicated enough to make judgments faithfully and wisely,” it reads.
Republicans have frequently criticized the Fed in recent years as going beyond its remit by wading into policy areas such as climate change and other social matters. Warsh addresses that during his opening statement. He will say the central bank “must stay in its lane.”
“Fed independence is placed at greatest risk when it strays into fiscal and social policies where it has neither authority nor expertise,” the testimony reads. “The Fed should not act as some general-purpose agency of the U.S. government or as an appellate court for matters that are rightly debated and decided elsewhere.”
Warsh will seek to position himself as someone with both insider knowledge of the Fed’s operations and a reform-minded outsider’s mindset, prepared to shake up the status quo.
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“If confirmed as chairman, I will seek to bring the experience of a one-time insider and the questioning spirit of an outsider,” the testimony reads. “I will keep the Fed mindful of its limits, focused on its mission, and delivering on its mandate. I will be faithful to the Constitution, to the Federal Reserve Act, and to the best of the Fed’s traditions.”
Warsh is set to testify before the Senate Banking Committee at 10 a.m. EDT.