Kevin Warsh calls for a complete overhaul of the leadership of the Federal Reserve System (Fed), particularly criticizing Chairman Jerome Powell and proposing closer coordination with the Treasury Department.
He emphasizes that the Fed currently lacks credibility due to delays in cutting interest rates, while supporting former President Trump's strategy of publicly criticizing the agency to push for strong reforms.
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Kevin Warsh opposes the current Fed leadership, particularly Chairman Powell.
He proposes a new agreement between the Fed and the Treasury to manage public debt more effectively.
He considers interest rate cuts necessary but believes the current Fed is implementing them in the wrong direction.
Why does Kevin Warsh demand a complete overhaul of the Fed leadership?
Kevin Warsh asserts that the delay and indecisiveness in the Fed's interest rate policy have severely damaged the agency's credibility. He points out that the current members, including Jerome Powell, are responsible for this "credibility gap." According to Warsh, the Fed's hesitation to cut interest rates is a significant drawback.
The current Fed does not have enough trust and strength to handle major economic challenges and needs a completely "new regime" for monetary policy.
Kevin Warsh, former Fed commissioner, July 17, 2025, CNBC
He also reiterates the former President Trump's view that public critiques of the Fed are necessary to promote changes in both policy and personnel.
How does Kevin Warsh assess the role of Chairman Jerome Powell?
Warsh directly criticizes Powell for approving expensive expenses for renovating the Fed's offices, while warning that the Chairman should be replaced when his term ends in May 2026. Although he does not directly say "Powell must be fired," he indicates that leadership change will definitely happen at the right time.
"I believe that a regime change at the Fed will occur at the right time."
Kevin Warsh, former Fed commissioner, July 17, 2025, CNBC
What does Kevin Warsh propose regarding coordination between the Fed and the Treasury to address US public debt?
Warsh proposes the idea of establishing a new agreement between the Fed and the Treasury, similar to the 1951 agreement, to coordinate monetary and fiscal policy. With the current US public debt reaching about $36 trillion, he believes the two agencies are working with dispersed objectives, wasting opportunities to effectively control debt costs.
He expects a mechanism where the Fed Chairman and the Treasury Secretary publicly inform the market about the goal of balancing the Fed's balance sheet, instead of the Fed unilaterally reducing its balance sheet by not reinvesting bonds (quantitative tightening) as it does now.
What is the significance of interest rate cuts in Warsh's proposal?
Warsh emphasizes that lowering interest rates is a necessary starting point to balance monetary policy with the current fiscal situation. He sees this as a tool to alleviate the burden of borrowing costs on public debt.
However, he did not mention the fact that previous interest rate cuts may not have necessarily reduced US government bond yields, complicating the policy's operational impact.
What role could Kevin Warsh play if appointed to lead the Fed?
Warsh is viewed as a candidate from the group supporting former President Trump, with a commitment to restructuring strategy, enhancing the connection between the Fed and the government, while aiming for lower interest rate policies to promote economic growth and reduce debt costs.
Frequently Asked Questions
Who is Kevin Warsh and what is his current role?
Kevin Warsh is a former Fed commissioner and is now Trump's supported candidate to lead the Federal Reserve System.
What does Warsh criticize about the Fed today?
He believes the Fed lacks credibility, has delayed interest rate cuts, and lacks coordination with the Treasury in managing monetary policy.
What does Warsh propose regarding the relationship between the Fed and the Treasury?
He calls for a new agreement similar to 1951 for both sides to coordinate closely in managing fiscal and monetary policy.
What is the significance of interest rate cuts according to Warsh?
He sees it as a necessary step to reduce the national borrowing costs and adjust the Fed's balance sheet.
How can Warsh change Fed policy?
He would steer the Fed's monetary policy in a more dovish direction, enhance transparency, and link with the Treasury to address economic challenges.
Source: https://tintucbitcoin.com/kevin-warsh-de-xuat-thay-chu-tich-powell/
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