If Kevin Warsh’s record is any indication, he aspires to be a transformative Fed chair. Given his druthers, Warsh would change the direction of bank regulation. He would change how the Fed interacts with the public, the Treasury, and Congress. He would even change how the Fed staff and the Federal Open Market Committee (FOMC) do their analyses. All would impinge on today’s hot topic—Fed independence.
Warsh’s vision, clear from his prior writings, would be a stark departure from recent incumbents. The question is whether he’ll be able to carry it out.
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Warsh’s top priority for the Fed is and has been price stability—that is, inflation control. Without price stability, he has suggested in past writing, all other economic goals will go unfulfilled, or at the very least face a steep uphill battle.
Looking back on Fed policy in a recent Wall Street Journal op-ed, he described inflation as always a “choice”—the result of “excessive government spending” and Fed decisions to support that spending by “printing too much money.” All the other explanations for recent and long-past inflationary pressures—the pandemic, supply-chain disruptions, wage increases, tariffs, labor shortages, and so on—are the sorts of relative price shifts that occur more or less constantly in every economy. That makes them merely “excuses” for poor Fed decisions.
Of course, the Fed’s remit covers full employment as well as price stability. But this consideration, Warsh wrote, should not tempt monetary policymakers into shifting emphasis from restraint to easing and then back again in response to the flow of statistics. Rather, a focus on price stability, by creating a more predictable economic environment, will encourage investment and best serve the goal of full employment.
If the objective of full employment requires something more, it should come not from distortions in monetary policy, Warsh has argued, but from regulatory reform. He acknowledges that such reform lies largely outside the Fed’s control. But the Fed does supervise banks and can help rationalize banking regulations. For example, Warsh has argued against Washington’s easy acceptance of the restrictive rules promulgated by the Switzerland-based Bank for International Settlements.
Outside questions of policy, Warsh would rid the Fed of what he has called “mission creep.” The central bank, he wrote, has distracted itself with peripheral matters—DEI, fiscal policy choices, climate change, tariffs, and the like. In 2020, for example, the Fed joined the so-called Network for Greening the Financial System; by 2025, in a different political environment, it withdrew from this body. Such matters may be worthwhile, but they distract the Fed from its essential duty of price stability.
These distractions have also raised questions about Fed independence. The Fed has invited interference by monetizing government deficits and by opining on fiscal policy. When the Fed’s mission creep extends beyond issues assigned to it, congressional and administrative questions are not just reasonable but warranted.
Warsh has claimed to believe strongly in Fed independence but “as a means of achieving particular policy outcomes,” not as “an end in itself.” He has also argued that criticism of the Fed, even from the president, is hardly a threat to its independence. If the Fed had stuck to its knitting and done a good job of it, its case for independence would stand on firmer ground.
Lastly, Warsh has long advocated for a virtue unusual in Washington’s culture: humility. Economics and policymaking are not hard sciences, he has argued, like physics. Fed governance cannot be “data-driven,” as some Fed chairs have insisted. At best, statistics offer only an imprecise indicator of reality—a weakness evident in the countless revisions Fed data undergo, sometimes years after the fact.
In the same vein, Warsh claims that the Fed’s practice of announcing future policy plans is fundamentally misleading. Such announcements imply that the Fed can know the future environment. No one can forecast like that—as the Fed’s miserable track record makes clear.
How hard Warsh would push this agenda as Fed chair is an open question. He may find himself coopted by the prevailing culture and give up on reform. (It’s happened before.) His agenda will certainly face resistance from current Fed governors and staff. If the past is any guide, it will be remarkable if he can institute even a small part of his desired focus on price stability and resistance to mission creep, much less his plea for humility.
Still, if he succeeds, Warsh’s tenure as Fed chair will represent a significant change from the status quo—and an experiment in the Fed committing to its core responsibility, rather than acting as a one-size-fits-all arm of government.
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