New Federal Reserve Chair Warsh emphasizes political independence, signals focus on inflation

WASHINGTON (AP) — New Federal Reserve Chair Kevin Warsh said Wednesday that the central bank would remain independent and seek to bring down inflation, likely foreclosing the rate cuts President Donald Trump has sought.

In remarks at a central bank conference in Sintra, Portugal, Warsh said that if businesses or households thought the Fed would accept inflation above 2%, “I guess they’d be disappointed. We’re going to deliver price stability.”

The Fed typically combats inflation by raising borrowing costs. When asked about Trump’s oft-repeated desire for lower rates, Warsh underscored the Fed’s independence from day-to-day politics.

“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.”

Such comments suggest that Warsh has shifted his views since replacing Jerome Powell as chair May 22. He called for lower rates last year as he essentially campaigned for the job of Fed chair. Since becoming chair, however, Warsh has appeared to shift away from that stance and instead has signaled a focus on getting inflation down.

On Wednesday he declined to signal what steps the Fed would take to fight inflation, consistent with his opposition to so-called “forward guidance,” in which central bank leaders foreshadow their next policy moves.

“The tactics, the strategy, and the rest, that’s still to come,” he said.

At his first news conference last month, Warsh also emphasized his goal of getting inflation back down to target. Wall Street investors expect the Fed could hike its key interest rate as soon as in September, from its current level of about 3.6% to roughly 3.9%.