After years of hostility toward the Federal Reserve, President Donald Trump now treats Chairman Kevin Warsh almost as a Cabinet member, a stark departure from his strained relationship with predecessor Jerome Powell. This closeness poses economic risks as it could undermine Fed independence, which exists to protect the economy from politicians’ instincts to run it too hot. Warsh has not changed the interest rates he inherited from Powell, yet the Trump administration views him as an ally in a way it never viewed Powell. While the White House says Trump is giving Warsh space to make decisions, analysts warn that if inflation resurges, Warsh would need to prove his independence by raising rates, which would slow the economy. Congressman Brad Sherman notably told Warsh during a hearing that the Fed had saved Trump from himself by not caving to political pressure on rates.
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