President Donald Trump is giving Federal Reserve Chairman Kevin Warsh a pass after the central bank voted unanimously to raise interest rates.
Trump repeatedly attacked Warsh’s predecessor Jerome Powell for holding interest rates steady rather than cutting them, and has called for the Fed to lower rates for months.
But now that Warsh has raised rates, the same attacks are not coming. Trump has criticized the broader Fed monetary policy committee for failing to cut rates, but he has conspicuously steered clear of attacking Warsh.
The shift is significant, given concerns from investors about the independence of the Fed.
TRUMP RIPS ‘HOSTILE’ FED BOARD AFTER INTEREST RATE HIKE BUT DEFENDS WARSH
Trump was asked about the Fed’s Wednesday decision to raise its interest rate target by 0.25 percentage points to a range of 3.75% to 4%.
Notably, it was a unanimous decision, meaning Warsh voted for the hike as well, and most Fed participants projected they would carry out another rate hike before the end of the year.
But Trump still declined to attack Warsh.
“No matter how good of a job, he’s got a hostile board,” Trump said on Wednesday night after being asked about Warsh and the hike.
Likewise, Warsh indicated there is a clear division between the Trump administration and himself during a press conference this week, where the Washington Examiner pressed him on Fed independence and when he last spoke with the president.
Warsh declined to provide any details about conversations he had with Trump.
“Part of the independence of the Federal Reserve is that we stay in our lane,” the chairman said. “Independence is a two-way street. We let people that do trade policy and fiscal policy stay in their lane, too. That’s how we can stand up here and call them [the] way we see them.”
Despite giving Warsh a reprieve — for now — Trump is still keen to see interest rates cut dramatically, as low as 1%.
Ahead of this week’s Fed meeting, Trump threatened to change U.S. trade policy unless the central bank slashed interest rates. He said he would cut off trade to countries with which the U.S. has a trade deficit if the Fed didn’t lower interest rates.
The president reiterated this in his first message on social media following Wednesday’s interest rate decision. As with his other comments, Trump didn’t cast blame for the hike on the Fed chief.
“LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” Trump wrote.
Some were thinking that this week’s decision to raise interest rates could signal another test of the Fed’s independence and that the amiable relationship between Trump and Warsh could break as a result of it. That is in large part because of how Trump previously pinned the blame for the Fed not cutting rates squarely on Powell, whom he appointed during his first term.
For instance, Trump branded Powell with the nickname “Too Late” for the board’s refusal to cut rates. He has also called him a “fool.”
But Trump wasn’t alone in the administration in his criticism of Warsh’s predecessor. Bill Pulte, the director of the Federal Housing Finance Agency, also blamed Powell for higher interest rates.
“Jay Powell needs to lower interest rates – enough is enough,” Pulte said on X in May of last year. “President Trump has crushed Biden’s inflation, and there is no reason not to lower rates. The housing market would be in much better shape if Chairman Powell does this.”
The situation with interest rates and Warsh comes at a precarious time. The war with Iran has pushed up oil prices and caused an uptick in inflation, largely driven by gasoline prices, making interest rate cuts by the Fed a far more challenging ask.
Additionally, the national debt just crossed the $40 trillion mark, with bond yields rising. The rising debt and interest costs have renewed concerns about the fiscal outlook.
Earlier this week, ahead of the Fed meeting, the yield on the 10-year Treasury, which is the benchmark for a variety of interest rates, touched 5%. That is the highest yield on that security since the summer of 2007, near the start of the financial crisis and the Great Recession.
The Treasury Department also announced last week that it will buy back $6 billion in longer-term debt in an effort to stabilize bond markets.
Yields have fallen since the Fed’s decision to hike interest rates this week and Trump’s refusal to criticize Warsh.
All major stock indices were up on Thursday morning, and the yield on the 10-year had fallen 4.94%.
TREASURY TRIPLES BUYBACK OF LONGER-TERM DEBT TO $6 BILLION
Ryan Young, a senior economist at the Competitive Enterprise Institute, told the Washington Examiner on Thursday morning that Trump is likely exercising self-restraint when it comes to Warsh and criticism of the Fed, perhaps because of the bond markets.
“I think it’s still the honeymoon period, and I think one reason why might be bond markets,” Young said. “If he’s already directing Bessent to do bond buybacks and other things, that does mean that he’s genuinely worried about bond markets.”