Warsh asserts Fed independence, vows reform

Warsh to Senate: No rate-cut promises, and the Fed needs an overhaul: Kevin Warsh made clear at his Senate Banking Committee confirmation hearing on Tuesday that lower rates are anything but a sure thing under his watch, pushing back hard on the idea that he’s been pre-wired to deliver what the White House wants.

No pressure? Trump “never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so,” the Fed chair nominee told the panel during a two-and-a-half-hour grilling (watch, runtime: 2:40:00). The line came just days after Trump told reporters he would be “disappointed” if his pick didn’t deliver cuts.

Elected officials voicing views on rates doesn’t, in itself, undermine Fed autonomy, Warsh argued. He drew a clear line, though, between monetary policy and everything else: on bank regulation, supervision, and the Fed’s non-monetary functions, he believes the president should have greater sway.

Regime change: Warsh argued that the Fed needs significant reform after committing policy mistakes during the post-Covid inflation surge, telling senators that once inflation takes hold, it becomes harder and more expensive to reverse — and that the errors of 2021-2022 are still weighing on US households today.

Cleaner inflation data is the top priority: Warsh floated a “new inflation framework” and said one of his first projects would be a joint public-private data effort to better capture underlying inflation trends. His preferred gauge? Trimmed-mean measures that strip out extreme price moves.

Rapid AI adoption could pull inflation lower — but proceed with caution: Warsh agreed that productivity gains from fast AI adoption could eventually bring down inflation and lift output, but stopped short of endorsing the Trump administration’s view that this justifies near-term rate cuts. The labor market effects and their timing remain uncertain and should be at the center of the Fed’s analysis, he said.

What’s next?

A committee vote isn’t coming soon — despite broad support. Warsh appears to have thebacking of most committee members. Senator Thom Tillis has vowed to block the nomination for as long as the DOJ investigation into Powell remains open. With Tillis retiring at year-end, he has little incentive to back down — meaning the next move likely rests with Trump and the Justice Department, not the Senate.

MARKETS THIS MORNING-

Asia-Pacific markets are mixed in early trading this morning as surging oil prices and strong corporate earnings pull investors in different directions. Japan’s Nikkei and the Hang Seng are both down, South Korea’s Kospi is up 0.8%, and the Shanghai Composite is flat. Wall Street appears set for a more volatile trading day, with futures in the red.

THE CLOSING BELL-

The ADX fell 0.8% yesterday on turnover of AED 977 mn. The index is down 2.1% YTD.

In the green: Umm Al Qaiwain General Investment Co. (+5.8%), Al Buhaira National Ins. Company (+5.0%), and Agility Global (+2.8%).

In the red: Aram Group (-4.8%), Two Point Zero Group (-4.7%), and Ins. House (-4.6%).

Over on the DFM, the index fell 1.1% on turnover of AED 832.8 mn. Meanwhile, Nasdaq Dubai was down 3.8%.