Report: Senate questions for Fed Chair nominee Kevin Warsh

As the US Senate prepares to consider the nomination of Kevin Warsh to head the Federal Reserve, the Competitive Enterprise Institute today offered lawmakers a set of crucial policy questions to ask the nominee during his confirmation hearing.

“The Senate should ensure that Warsh’s decisions as Chair will prioritize price stability, the Fed’s institutional independence, and long-term economic health,” said Steve Swedberg, CEI policy analyst and report co-author. “The role of Fed Chair can support or undermine markets, the economy, and, most importantly, consumers. Fed policy shapes the cost of borrowing, price stability, and how secure people feel about their jobs and savings.”

The CEI report outlines nine key topics for lawmakers to ask about.

• Federal Reserve independence – Warsh’s defense (or abdication) of Fed independence is more important for evaluating his fitness for the role than any individual policy decision.
• Fed–Treasury coordination – Warsh has called for greater coordination between the Fed and the Treasury, raising concerns that monetary policy could be used to support government borrowing at the expense of independence and price stability.
• Interest rate policy – Interest rate decisions should be anchored to a durable framework. Warsh should be asked about his views, like how the Fed can ensure policy is insulated from short-term political or market pressures.
• Balance sheet reduction – Warsh should be asked how he would approach competing goals of lowering interest rates and shrinking the Fed’s balance sheet in a way that does not destabilize markets.
• Forward guidance – Signaling future policy actions can make it harder for the Fed to adjust course without disrupting markets or undermining the Fed’s credibility. Warsh should be asked how he might reform this practice.
• Central bank digital currency – Warsh has previously supported a CBDC, despite concerns about privacy, government control of financial data, and crowding out private innovation.
• FedNow – This Fed payment system competes with private sector alternatives while being operated by the same institution that regulates these providers. Lawmakers should ask how Warsh would address potential conflicts of interest and avoid crowding out innovation.
• Rules-based policy – The Fed currently exercises significant discretion in setting policy. Warsh should be asked his views on adopting a rules-based framework (such as a Taylor rule) to improve accountability, reduce political pressure, and anchor expectations.
• Dual mandate – The Fed’s dual mandate of balancing inflation and employment can create conflicting objectives and policy ambiguity. Warsh should be pressed on whether the Fed should instead focus on a single mandate centered on price stability.

> View the report, Questions for Kevin Warsh, by Steve Swedberg, John Berlau, and Ryan Young on CEI.org.