Warsh Vows Fed Independence, Targets Inflation

New Federal Reserve Chair Kevin Warsh said Wednesday the central bank plans to guard its independence and push inflation back down, a stance that appears to rule out the interest rate cuts President Trump has been demanding.

Warsh Draws a Line on Inflation

Speaking at a central banking conference in Sintra, Portugal, Warsh made clear he has no interest in letting inflation run hot. Asked what would happen if businesses or households assumed the Fed would tolerate inflation above its 2% target, he did not mince words. "I guess they'd be disappointed," he said. "We're going to deliver price stability." That's the core job of a central bank facing rising prices: raise borrowing costs until things cool off.

No Bending to the White House

Reporters pressed Warsh on Trump's repeated calls for lower interest rates, and he answered by leaning hard on the Fed's tradition of staying out of political fights. "We've been an independent central bank for a very long time," he said. "We're going to be an independent central bank at this moment and you're going to see no changes to that."

That answer carries some irony. Warsh spent part of last year publicly arguing for lower rates while he was, by most accounts, angling to land the chair's job. Since taking over from Jerome Powell on May 22, though, he has moved away from that position and toward a message centered on cooling inflation instead.

Keeping the Next Move Under Wraps

Warsh declined to spell out exactly how the Fed intends to fight inflation from here, and that vagueness seems deliberate. He has long been skeptical of what economists call forward guidance, the practice of central bankers previewing their next policy steps to markets. "The tactics, the strategy, and the rest, that's still to come," he said Wednesday, echoing a similar emphasis on inflation control that he struck at his first press conference as chair last month.

What Traders Are Betting On

Wall Street isn't waiting around for more clarity. Investors are pricing in the possibility that the Fed raises its benchmark interest rate as soon as September, taking it from around 3.6% now to somewhere near 3.9%. That would mark a reversal from the rate cutting many had expected earlier this year, and it lines up with Warsh's public tone since stepping into the role.