JUST IN: Confirmed as head of the Fed, Kevin Warsh has many challenges to overcome
International Briefing:
Global attention remains focused on this evolving story as officials and analysts assess the broader implications.
Confirmed this Wednesday as president of the American Federal Reserve (Fed), Kevin Warsh arrives at the head of a divided institution, faced with persistent inflation and growing political tensions around American monetary policy. Former governor of the Fed between 2006 and 2011, he will have to quickly convince that he can preserve the independence of the central bank despite Donald Trump’s stated expectations in favor of a reduction in interest rates. During his hearing before the Senate last month, Kevin Warsh presented himself as an “independent actor”. He also assured that Donald Trump had not asked him to reduce key rates and that he would “never” have committed to doing so. This supposed proximity to the White House, however, fuels the concerns of several political and economic leaders. For David Wessel, researcher at the Brookings Institution, the new president of the Fed “will have to gain confidence by arriving with a handicap that his predecessors did not have.” Significant divergences on interest rates Kevin Warsh will also have to deal with a monetary policy committee that is far from united. The Federal Open Market Committee (FOMC), responsible for setting interest rates, has not displayed unanimity for several months. Kathryn Judge, professor of law at Columbia University, recalls that “on paper, the president has always been only one vote among the twelve on the FOMC and one vote among the seven on the Council.” She nevertheless underlines that the influence of the president of the Fed has historically gone beyond this simple institutional framework, with no guarantee that this remains the case today. Internal differences are already appearing on the question of rates. According to David Wessel, several regional Fed officials have recently indicated that they rule out a rapid decline in the cost of credit. Inflation, which has been above the 2% target for more than five years, continues to worry central bankers, particularly in the context of tensions in the Middle East. Moody’s chief economist, Mark Zandi, believes that “Warsh’s problem is that he would like to lower rates but the economy will not allow him to do so.” Jerome Powell still present within the institution Another unusual element for the new president of the Fed: the presence of Jerome Powell within the board of governors. Although he left the presidency, the latter indicated that he would retain his seat until January 2028 in the face of the political-judicial pressures to which he says he is subject. He nevertheless promised to “keep a low profile”. Donald Trump, who appointed him during his first term, has never hidden his criticism of him, going so far as to publish a photomontage showing Jerome Powell falling into a dumpster.Our file on the American Federal BankFor observers, the relationship between Kevin Warsh and Donald Trump could become a major factor of tension. David Wessel considers that this will be “probably Mr. Warsh’s biggest challenge”, believing that the American president “does not respect the independence of the Fed and wants a reduction in interest rates”. Mark Zandi, however, judges that maintaining Jerome Powell at the Fed could indirectly protect his successor, estimating that “Powell could appear to be the bad guy” if rates do not fall in the coming months.
International Perspective:
Experts suggest the long-term impact of these developments may become clearer as more information emerges.
Global audiences continue following the story closely as regional responses begin to emerge.
Readers are encouraged to monitor future developments as the situation evolves.
Source: This article was originally published by 20Minutes – Actu Monde and adapted for our international English-speaking audience.
Read the original article here.