Fed Chair nominee Warsh says Fed independence is 'essential'

Kevin Warsh, nominated to be the next Federal Reserve chairman, told lawmakers at his confirmation hearing Tuesday that he's committed to maintaining the central bank's independence to set interest rates, but said pressure from outside does not threaten its autonomy.

Mr. Warsh's opening remarks in what's expected to be a contentious hearing made it clear that he will try to walk a tightrope. He needs to appeal to lawmakers who argue that the Fed must be insulated from political pressure while also appeasing President Trump, who has repeatedly called for lower interest rates.

Mr. Trump, who originally nominated current Chair Jerome Powell during his first term in 2017, has waged a long-term battle to browbeat the central bank leader into slashing interest rates.

In recent months, Mr. Powell has become embroiled in a Department of Justice criminal probe over the cost of renovations to the Fed's D.C. headquarters.

The president has also hurled a barrage of insults at Mr. Powell, calling him "stupid" and nicknaming him "too late" for being slow to lower interest rates.

"Monetary policy independence is essential. I don't believe the independence of monetary policy is threatened when elected officials state their views on rates," Mr. Warsh told the Senate Banking Committee. "Fed independence is up to the Fed.

"I am committed to ensuring that the conduct of monetary policy remains strictly independent, equally committed to work with the administration and Congress on nonmonetary matters that are part of the Fed's remit," he said.

Committee Chair Sen. Tim Scott, South Carolina Republican, opened the hearing by emphasizing the need for an independent Fed.

"An independent Federal Reserve is essential to achieving its mission," Mr. Scott said. "Markets depend on it, families depend on it, and that independence must be protected."

He also endorsed Warsh for the position, calling him "battle-tested" from his time on the Fed board in 2008.

Sen. Elizabeth Warren, Massachusetts Democrat, said Mr. Warsh will be a "sock puppet" for Mr. Trump while undermining the Fed's ability to independently make monetary decisions. She said the president "repeatedly and illegally" attempted to "take over the central bank."

"Having a sock puppet in charge of the Fed would also give the president access to the Fed's powerful authorities to enrich himself, his family and his Wall Street buddies," she said. "A Fed under Donald Trump's control creates more opportunities for Trump's corruption."