Fed Chair Warsh Stresses Independence, Vows Inflation Focus

New Federal Reserve Chair Kevin Warsh told a central banking conference in Sintra, Portugal on Wednesday that the Fed will guard its independence and push inflation back to target, a stance that leaves little room for the rate cuts President Donald Trump has been demanding.

Key Takeaways

• Warsh said businesses and households hoping the Fed would tolerate inflation above 2% would be disappointed.
• He insisted the Fed remains independent of political pressure, including from Trump.
• Warsh took over as chair on May 22, replacing Jerome Powell.
• He avoided detailing specific policy tools, citing his opposition to forward guidance.
• Markets are pricing in a possible rate increase in September, from around 3.6% to about 3.9%.

Warsh Draws a Line on Political Pressure

Asked directly about Trump's repeated calls for lower borrowing costs, Warsh made clear the central bank would not bend. He described the Fed's independence as a long standing institutional feature that isn't up for negotiation, telling attendees that nothing about that arrangement would change under his watch. It was a pointed answer given how vocally Trump has pushed for cheaper credit throughout his term.

A Notable Shift From His Old Position

The comments mark a turnaround for Warsh himself. Just last year, while effectively lobbying for the chair's job, he argued for lower interest rates. Since stepping into the role, though, he has pivoted toward emphasizing inflation control over rate relief, a change that became apparent at his first press conference last month when he stressed getting prices back to the Fed's target.

Why the Fed Chair Kevin Warsh Is Staying Quiet on Tactics

Warsh declined to lay out how exactly the Fed intends to fight inflation going forward. He's long been skeptical of forward guidance, the practice of central bankers previewing their next moves, and he stuck to that principle in Sintra.