I’d continue to do my job: Fed chief on facing Trump administration’s ‘pressure’ over interest-rate policies

Washington: US Federal Reserve Chairman Kevin Warsh has pledged to protect the central bank’s independence as Democratic lawmakers pressed him on whether he would resist political pressure from President Donald Trump over interest rates.

Warsh faced repeated questions about the relationship between the White House and the Federal Reserve during his first appearance before the House Financial Services Committee on Tuesday (local time) since becoming chairman.

“Do you work for Donald Trump? Yes or no?” Democratic Congresswoman Nydia Velazquez asked him.

“We’re an independent central bank; we’re honoured to be independent,” Warsh replied. “Our independence came from you.”

Velazquez then asked what he would do if Trump or other administration officials targeted him or fellow Federal Reserve governors because of their votes on interest-rate policy.

Warsh initially declined to engage with the hypothetical situation. He noted that the Supreme Court had recognised the Federal Reserve’s independence in conducting monetary policy.

Pressed again on how he would respond, Warsh said: “I would continue to do my job.”

The exchange came amid broader concern among Democrats about political influence over the central bank. The Federal Reserve’s decisions affect borrowing costs, employment, inflation, financial markets and the wider US economy.

Warsh acknowledged that the environment outside the central bank was intensely political but said he wanted to keep partisan considerations out of its decisions.

“Outside the four walls of the Federal Reserve there’s no doubt a lot of politics,” he said. “But my goal inside the central bank is for there to be no politics. The extent there’s politics there, we’re going to get rid of them.”

Velazquez reminded Warsh that he had promised during his confirmation hearing to ensure monetary policy remained “strictly independent”. Asked whether he remained committed to that position, Warsh answered: “Absolutely.”

Democratic Congresswoman Maxine Waters also raised the issue of presidential pressure on the Fed. She said Trump had repeatedly attacked Warsh’s predecessor, Jerome Powell, over interest rates and asked how the new chairman intended to defend his colleagues and the institution.

Warsh said he had demonstrated “a commitment to independence and a commitment to reform” during his first six or seven weeks in office.

“Those two are of common importance, and I’m going to deliver on both of them,” he said.

The chairman also told lawmakers that the Fed would remain within its legal mandate and avoid becoming involved in political disputes outside its responsibilities.

The US Congress created the Federal Reserve as an independent central bank, although its chairman and governors are nominated by the president and confirmed by the Senate. The Fed is accountable to Congress, and its chair presents a monetary policy report to lawmakers twice a year.

The Fed’s independence is closely watched internationally because US interest-rate decisions influence the dollar, global borrowing costs and capital flows.

IANS