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00:00 Julie
A Yahoo Finance analysis reveals Federal Reserve Chair nominee Kevin Warsh never dissented while he was a governor on the Central Bank. Federal Reserve correspondent Jennifer Schonberger joins me now with a closer look. Interesting here discovery, Jen.
00:12 Jennifer Schonberger
Thank you, Julie. Good morning to you. A look back at Federal Reserve Chair nominee Kevin Warsh’s speeches during his time as Fed governor and transcripts of policy meetings revealed that he routinely raised concerns about inflation and protecting central bank credibility by keeping inflation expectations anchored, even as he voted during his tenure to mostly hold rates steady or lower them.
00:53 Jennifer Schonberger
Warsh’s voting record at the FOMC during his time as governor from February 2006 to March 2011 shows that he voted in line with the committee consensus every time and never dissented.
01:07 Jennifer Schonberger
That includes three hikes when he first joined in 2006, but then holding steady and then cutting with the onset of the financial crisis, and then holding rates near zero as ripples from that deep recession persisted.
01:29 Jennifer Schonberger
In fact, back in December of 2006, Warsh voted to hold rates steady after hiking in the first quarter of that year, even as one of the regional Fed presidents at the time, Jeffrey Lacker, dissented to raise rates that month.
01:50 Jennifer Schonberger
Now, during the Fed’s policy meeting in April of 2008, that was roughly four months before Lehman Brothers failed at the height of the financial crisis, Warsh had expressed concern about inflation at that time in addition to the strength of the job market. While Warsh did vote in favor of a 25 basis point rate cut at that meeting, he warned that continuing to cut rates could encourage the perception that the Fed has a greater tolerance for inflation than is prudent, which could push up inflation expectations.
02:28 Jennifer Schonberger
Now, Warsh was also vocal during his tenure about protecting central bank independence by protecting and keeping in check inflation expectations, but also by not falling to quote unquote whims of politicians. And a speech he made back in March of 2010, Warsh said that the Fed’s credibility required, quote,
02:51 Jennifer Schonberger
fierce independence from the whims of Washington and the wants of Wall Street and from a pernicious short-termism that can undermine the proper conduct of policy.
03:07 Jennifer Schonberger
Now, a couple of former Fed officials I did speak to said, perhaps we shouldn’t read too much into Warsh’s voting record because at that time, it was not in vogue to dissent by Fed governors out of deference and respect to the Fed chair. Over the past year, Warsh has made the case that he believes that
03:29 Jennifer Schonberger
interest rates could be lower because we’re experiencing a productivity boom from AI, which could allow inflation to come down. Of course, whatever direction Warsh believes interest rates need to go, he will need to create a consensus on the FOMC.