Fed Chair Contender Kevin Warsh May Not Succeed Powell

Kevin Warsh may ultimately not be President Donald Trump’s pick to lead the Federal Reserve, but in the 14 years since he last worked there, Warsh has become a leading intellectual force in the conservative movement to reform the institution.

Warsh contends that the Fed’s missteps have left it unable to control interest rates. (Photo: Hoover Institution)

The goal, Matt Peterson reported for Barron’s Daily, is to downsize the central bank. That effort would start with undoing current Chair Jerome Powell’s policies since taking the post in 2018.

“The Powell Fed has failed to get interest rates about right for most of the tenure of the Powell Fed,” Warsh told Barron’s Daily.

In 2020, the Fed adopted a policy allowing inflation to run above its 2% target to compensate for years when it ran below that level.

Warsh argues that this framework made the Fed late to acknowledge the dangers of the post-COVID inflation surge, which peaked at 9.1% in June 2022.

“At the last meeting, they said they find themselves in a very challenging position, as if they are victims,” Warsh said. “They are not victims of the state of prices—they are the cause of them.”

Warsh contends that the Fed’s missteps have left it unable to control interest rates.

Powell’s defenders counter that while the Fed may have been slow to react to the inflation spike, its eventual actions successfully curbed price growth. Critics say Warsh is cherry-picking moments to fit his argument.

He is calling for a fundamental rethink of the economic models the Fed uses, which he says wrongly focus on consumer spending as the main driver of inflation. Instead, he advocates a return to monetarism—the idea that increases in the money supply can drive inflation.