Warsh says he got no pressure from Trump to cut rates even as president publicly pushes for them

“The president never once asked me to commit to any particular interest rate decision, period,” Kevin Warsh, a former top Fed official, said under questioning by the Senate Banking Committee. “Nor would I ever agree to do so if he had. … I will be an independent actor if confirmed as chair of the Federal Reserve.”

Warsh’s comments came just hours after Trump, in an interview on CNBC, was asked if he would be disappointed if Warsh didn’t immediately cut rates and responded, “I would.”

The comments underscore the challenge faced by Warsh, 56, a financier and former member of the Fed’s board of governors whom Trump named in January to replace the current Fed chair, Jerome Powell. Democrats on the committee accused Warsh of flip-flopping on interest rates over the years, supporting higher interest rates under Democratic presidents and advocating rate cuts during Trump’s time in office. Investors are watching the hearing closely to see how Warsh balances Trump’s demands with worsening inflation, as the war in Iran pushes up the price of gasoline.

Higher inflation typically leads the Fed to raise rates, or at least keep them unchanged, rather than cut them. When the Fed changes its key rate, it can affect mortgages, auto loans, and business borrowing.

Yet Warsh’s account was challenged by Sen. Ruben Gallego, an Arizona Democrat, who said that Wall Street Journal reporting last year found that Trump had urged Warsh to reduce borrowing costs.

“Who’s lying here? Is it you or the president?” Gallego asked.

“I think those reporters need better sources,” Warsh responded.

For all the back and forth, the hearing didn’t appear to advance Warsh’s nomination, which has been delayed by a Justice Department investigation into the Fed and Powell, over brief testimony Powell gave last June before the same panel about a building renovation.

Sen. Thom Tillis, a North Carolina Republican on the committee, reiterated Tuesday he wouldn’t vote for Warsh until the investigation is dropped. With the committee closely divided and all Democrats opposed to his nomination, Tillis’ opposition is enough to bottle it up in committee.

“We have got to get rid of this investigation,” Tillis said, “so I can support your nomination.”

Tillis has previously said that all seven Republicans on the committee have signed a letter stating that Powell did not commit a crime when he testified before the panel last June. Federal prosecutors, led by Assistant U.S. Attorney Jeannine Pirro, are investigating his testimony for potential perjury, though a judge said last month they offered no evidence to support the charge when he threw out subpoenas Pirro had issued.

Prosecutors from her office as recently as last week sought access to the Fed’s building project but were turned away, revealing that the Trump administration has not reversed course despite opposition from members of his own party that are essential to Warsh’s confirmation.

In his opening remarks, Warsh told the Senate Banking Committee that one of his top goals would be to fight inflation, which remains elevated at 3.3% annually.

“Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish,” Warsh said. “Inflation is a choice, and the Fed must take responsibility for it.”

Warsh would be in a tough spot if confirmed. Inflation is worsening, making it much harder for the Fed to implement the interest rate cuts Trump so desperately seeks. The conflict could also slow the economy, as well as hiring. And if Warsh ultimately becomes chair, he may very well find his predecessor, Powell, still sitting on the Fed’s governing board, an uncomfortable arrangement that hasn’t occurred since the late 1940s.

Warsh said the Fed’s political independence is “essential,” and that the central bank wasn’t threatened when “elected officials — presidents, senators, or members of the House — state their views on interest rates.” Trump has repeatedly urged Powell to cut the Fed’s key rate from its current level of about 3.6% to as low as 1%, a view almost no economist shares.

Sen. Elizabeth Warren, a Massachusetts Democrat, said that Trump has not just stated his opinions on rates, but has sought to fire a Fed governor and is investigating Powell.

“The Senate should not be aiding and abetting Donald Trump’s illegal takeover of the Fed by installing his chosen sock puppet as chair,” she said Tuesday.

Warren also noted that Warsh has not disclosed all of his financial holdings, which include investments in start-ups and private companies, or the size of those financial stakes. For example, Warsh has said he has holdings in SpaceX and Polymarket, but has not said how large those investments are.

Warren charged that Warsh is not in compliance with ethics requirements. Warsh argued that the Office of Government Ethics has signed off on his plan to sell all his assets within 90 days of his confirmation.

The turmoil could make a potential transition from Powell to Warsh an unusually turbulent one for the world’s most pivotal central bank, which has historically experienced smooth transfers of power. Should the change in leadership prove particularly bumpy, it could unnerve markets and lift longer-term interest rates.

Powell’s term as chair ends May 15. He said last month that he would remain as chair until a successor is named. Powell also is serving a separate term as a member of the Fed’s governing board that lasts until January 2028. Fed chairs typically leave the board when their terms as chair end, but Powell said last month he would remain on the board, even if a new chair is approved, until the investigation is dropped.

Trump said he would fire Powell if he attempted to remain at the Fed. Yet Trump’s previous attempt to remove a Fed governor, Lisa Cook, has been tied up in court. During oral arguments in January, a majority of justices on the Supreme Court appeared to lean toward leaving Cook at the Fed.

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