Fed Chairman Warsh says he meets 'often' with Trump administration, defends independence

• Warsh meets weekly with Treasury Secretary Bessent per tradition but also talks to him 'often' between scheduled meetings, going beyond the limited contact his predecessor Powell had with the previous Treasury Secretary
• The FOMC appears divided on rate policy, with some governors suggesting rate increases may be necessary this year, while Trump continues calling for cuts and inflation has remained above the Fed's 2% target for 63 months
• Warsh has created task forces to review inflation measurement and the Fed's balance sheet policy, and previously advocated for a new Treasury-Fed Accord that would hand some Fed balance sheet powers to the Treasury Secretary

Summary

Federal Reserve Chairman Kevin Warsh confirmed he maintains regular communication with the Trump administration but defended his independence during Senate testimony on Wednesday. While Warsh meets weekly with Treasury Secretary Scott Bessent under longstanding tradition, he disclosed he speaks with Bessent "often" between scheduled meetings. However, Warsh declined to confirm whether he has spoken directly with President Trump since becoming chair seven weeks ago.

Key Context:

Warsh was appointed by Trump, who made lower interest rates a key criterion for his Fed chair selection and continues advocating for cuts. This creates a delicate situation as investors scrutinize whether Warsh's decisions are independent or influenced by political pressure.

Inflation and Policy Outlook:

• Inflation has remained above the Fed's 2% target for 63 consecutive months
• Recent June data showed inflation declining, though Warsh cautioned against premature celebration
• The Federal Open Market Committee (FOMC) appears divided on rate direction
• Fed Governor Christopher Waller and NY Fed President John Williams suggested rate increases may be necessary this year

Independence Claims:

Warsh repeatedly emphasized that "the independence of the Federal Reserve is sacrosanct," stating the Fed's power derives from credibility. He has established task forces to review inflation measurement and the Fed's balance sheet policy.

Administrative Relations:

Top Trump economic advisor Kevin Hassett confirmed speaking with Warsh, praising the new task forces. The White House stated it doesn't discuss the president's private conversations and defers to Warsh on Fed management, despite Trump's preference for lower rates.