Kevin Warsh

Kevin Warsh used his first congressional testimony on July 15 to draw a hard line on inflation, telling lawmakers the Fed has "no tolerance for persistently elevated inflation" and rejecting any read that June's cooler CPI of 3.5% means the job is done. He called the first monthly drop in wholesale prices "one data point" and warned that renewed Middle East hostilities and AI-driven chip shortages could push inflation back up. He defended Fed independence as sacrosanct, declining to say whether he has communicated with Trump since taking office seven weeks ago.

Trump is simultaneously demanding rate cuts and telling Warsh to "be totally independent," a contradictory pressure the chair has so far resisted. A June Supreme Court ruling blocked Trump's attempt to remove Governor Lisa Cook, carving out the Fed as exempt from expanded presidential firing power and giving Warsh's Board a structural backstop.

Inside the Fed, Warsh presides over a deeply split FOMC. June minutes from his first meeting show a three-way divide among hawks, holders, and cut advocates. He has framed the disagreement as a "good family fight" and formally removed forward guidance from FOMC statements, replacing it with what he calls "process transparency" — giving markets only "the facts." Governors Cook and Waller are pushing him toward a hike, while New York Fed President John Williams argues policy is "exactly in the right place."

Warsh is also restructuring the institution. He appointed 15 external advisers across five reform task forces covering inflation frameworks, the balance sheet, data, productivity and jobs, and communications, all due to report by year-end. The choice of Xbox CEO Asha Sharma as co-lead of the productivity panel drew criticism over her recent 3,200 layoffs and a prior DOJ discrimination settlement. He is advocating trimmed-mean averages as the Fed's preferred inflation measure, though Dallas Fed President Lorie Logan warned those measures "may be biased downward."

His core thesis holds that AI is "a significant disinflationary force" and "the biggest productivity wave our generation will experience," even as data-center spending pushes up semiconductor and electricity prices today. He took that message to the ECB Forum in Sintra, his first major international appearance, finding "open-mindedness" among peers.

Warsh is holding rates at 3.50%-3.75% into the July 28-29 FOMC meeting while flagging oil-driven inflation risk from the renewed Hormuz blockade, which has pushed Brent crude above $86. He has offered no guidance on the meeting's outcome.