print-icon
print-icon

Watch Live: Warsh Blasts Fed's 'Fatal Policy Error' On Inflation, Pledges Strict Independence As Tillis Confirms Hold On Fed Chair Nomination

Tyler Durden's Photo
by Tyler Durden
Authored...

Latest: 

  • Warsh labeled the Fed’s 2021-2022 response a “fatal policy error” on inflation.
  • He demands a new policy framework, tools, and major communications reform.
  • Warsh rejects forward guidance and refuses to preview future rate moves.
  • Price stability exists when no one talks about inflation, Warsh testified.
  • Warsh disputes that tariffs caused the recent inflation overshoot.
  • Inflation data used by the Fed is “quite imperfect,” per Warsh.
  • He focuses most on the underlying inflation rate.
  • Trump never asked Warsh to commit to specific interest-rate cuts.
  • Sen. Tillis blocks Warsh’s nomination until the DOJ drops the Powell probe.

During his live Senate Banking Committee confirmation hearing on Tuesday, Federal Reserve chair nominee Kevin Warsh criticized past Fed mistakes, called for a “reform-oriented” central bank, pledged strict independence from President Trump, highlighted AI as “the most disruptive moment in modern economic history,” and faced Democratic scrutiny over his $131–209 million in assets (which he agreed to divest, including stakes tied to Stanley Druckenmiller’s Juggernaut Fund) while dodging a direct answer on whether Trump lost the 2020 election.

Warsh demanded a new policy framework, new tools, and major communications reform, including scrapping problematic forward guidance and the dot plot - stating he won’t preview future rate decisions.

He defined price stability as inflation so tame “that no one is talking about it” across boardrooms or kitchen tables.

Warsh disputes that tariffs caused the recent inflation overshoot.

He called the data being used to judge inflation “quite imperfect," and that he is most interested in the underlying inflation rate.

Warsh confirmed President Trump “never once asked me to commit to any particular interest rate decision.”

Meanwhile, - as he's threatened to do for months, Sen. Thom Tillis (R-NC) announced he will block Warsh’s nomination until the DOJ drops its investigation into Chair Powell, tying the committee vote.

Thom Tillis, Republican Senator from North Carolina, reiterated that he will block the nomination of Kevin Warsh to be chair of the Federal Reserve until the "bogus investigation" into the Fed and Chair Powell is completed. Speaking at Warsh’s nomination hearing before the Senate Banking Committee, Tillis said he was going to talk about “what’s preventing me from being in a position to vote for you until” the probe is wrapped up rather than ask questions, as he believes Warsh has “extraordinary” and “impeccable” credentials for the job. There are 13 Republicans on the committee and 11 Democrats, so Tillis’ refusal to approve ties the committee 12-12 and the nomination cannot move to the Senate approval for confirmation. Given President Trump's comments earlier about the need to pursue the investigation, this standoff is going nowhere. "Let's get rid of this investigation so I can support your confirmation", Tillis said. -Bloomberg

Lookin' like a June confirmation...

Kevin Warsh confirmed as Fed Chair by June 30?
Yes 80% · No 21%
View full market & trade on Polymarket

* * *

President Donald Trump’s nominee to lead the Federal Reserve, Kevin Warsh, is scheduled to appear before the Senate Banking Committee today at 10:00 a.m. ET for his confirmation hearing - his first public test in the high-stakes process to become the next chair of the central bank.

The hearing, set to take place in the Dirksen Senate Office Building Room 538 in a hybrid open session, comes less than a month before current Chair Jerome Powell’s term expires on May 15. Warsh, a former Fed governor who served from 2006 to 2011, was nominated by Trump on March 4 to serve as both a Board member and chairman.

Watch Live:

Warsh, a former Fed governor who has spent years criticizing the institution as directionless and in need of “regime change," now has the chance to outline his vision for remaking the world’s most powerful central bank. But he faces a delicate balancing act: signaling loyalty to Trump’s push for lower interest rates while reassuring markets, lawmakers, and global observers that he will safeguard the Fed’s independence and keep inflation in check.

In prepared opening remarks released yesterday, Warsh strikes a deliberate tone on the politically sensitive issue of central bank independence. He plans to state that “monetary policy independence is essential” and that decisions must rest on “analytic rigor, meaningful deliberation and unclouded decision-making.” At the same time, he will argue that the Fed has sometimes “extended its reach” beyond its core mandate, eroding its credibility, and that presidents or lawmakers expressing views on interest rates does not inherently undermine operational independence.

He also declares that “inflation is a choice” and that the Fed must take responsibility for price stability while staying firmly “in its lane” - avoiding fiscal, regulatory, or social policy areas where it lacks authority or expertise.

As anticipated, Senate Democrats are preparing to aggressively question Warsh, focusing on whether he can truly insulate the Fed from political pressure - especially given Trump’s repeated calls for sharply lower interest rates. Ranking Member Sen. Elizabeth Warren (D-MA) and other Democrats have signaled they will press him on potential conflicts of interest, the adequacy of his financial disclosures (which revealed more than $100 million in assets but left some holdings opaque), plans to divest certain investments, and any private communications with the Trump administration.

All 11 Democrats on the committee are widely expected to oppose the nomination. Some had pushed to delay the hearing pending the outcome of Justice Department investigations involving Powell and Governor Lisa Cook, but those efforts did not succeed.

On the Republican side, support for Warsh appears solid, though not unanimous. A handful of GOP senators have voiced reservations linked to the ongoing probes, but the party holds the majority and is positioned to advance the nomination out of committee.

Markets and policymakers will be watching closely for any signals on Warsh’s views regarding the Fed’s balance sheet, the pace of potential rate cuts, and his overall approach to the dual mandate. Analysts describe him as pragmatic rather than a radical departure from current policy, but today’s testimony could shift expectations ahead of the next FOMC meeting.

According to Goldman, here's what to watch for:

  • On Econ (Mericle): i) How has the war affected his views – Has he shifted toward the FOMC’s wait-and-see approach, which might signal an intention to work toward building consensus? Ii) Does he talk about looking through tariff + energy passthrough? How will Warsh characterize where inflation stands + how the FOMC should treat tariff and oil effects? Iii) What does he say about shrinking the Fed’s balance sheet? Are incremental reductions related to regulatory + supervisory changes enough or is he still pushing for a more substantial reduction?
  • Tillis block (Pastrick): Senator Tillis key to watch: No expectation that he will oppose Warsh as a candidate but we do NOT expect to see any openings from Tillis that outline a new position on not supporting the nomination while Fed Chair Powell is under legal scrutiny.
  • On Rates markets (Marshall): i) Insight into where Warsh anchors his longer-run views could impact the distribution of risks around terminal rate pricing; ii) That Warsh supports a smaller balance sheet would come as no surprise, but details around how he might seek to achieve it, and what potential Fed/Treasury interaction might look like, would shape market perceptions on balance sheet trajectory; iii) Bank regulation: Emphasis on things like adjustments to the liquidity rules + internal liquidity stress testing could reinforce the case that meaningful shifts in policy follow a shift in reserve demand (rather than result from efforts to shift the reserve framework)

The confirmation process remains fluid. A committee vote would follow today’s hearing, with the full Senate expected to take up the nomination soon after. Warsh’s performance - particularly how he navigates questions on Fed independence amid White House expectations - will be pivotal in determining whether he assumes the role by mid-May.