Trump Says He Talked to Warsh. What Does That Mean for Fed Independence?

WSJ What’s News

This episode of WSJ What's News covers President Trump's claim of discussing Fed rate decisions with Chairman Kevin Warsh, raising concerns

Key takeaways

Trump's claim of discussing Fed rate decisions with Warsh, if true, challenges decades of institutional independence between the White House and Federal Reserve.
The Fed's recent rate hike was initially seen as a reaffirmation of independence, but Trump's comments cast doubt on that narrative.

Main topics

Federal Reserve Independence
Political Influence on Monetary Policy

Notable quotes

Part of the independence of the Federal Reserve is we stay in our lane. Independence is a two-way street.

I talked to Kevin and I said, you might as well vote with the board because it's not going to matter. The board is very hostile. They're very political.

Conclusion

While the Fed's recent decision was seen as a stand for independence, Trump's claim

Transcript preview

Speaker 8 (0:00) This podcast is brought to you by Altona AI. What if you could see your entire supply chain, every tier, every supplier, every origin, and verify compliance before goods ever ship? That's Altona, the network for trusted trade. AI that monitors continuously, product passports that prove origin, process, and compliance. Trust that actually travels with the goods. Faster shipments, lower costs, resilience built in. Trust moves trade. Altona makes it possible. Learn more at Altona.ai. Speaker 2 (0:33) President Trump said he talked to Warsh before yesterday's rate decision, raising new questions about the Fed's independence. Plus, House lawmakers head home ahead of the elections. Some critics say they should be passing more bills. Speaker 1 (0:46) There have been around 104 laws that have been enacted in the current Congress, which is putting it at pace for fewer than any past Congresses since the Civil War. Speaker 2 (0:55) And the U.K.'s King Charles wades into the AI safety debate. It's Thursday, September 17th. I'm Alex Ocilla for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Speaker 2 (1:16) Today, investors are still processing the Fed's latest rate decision and Chairman Kevin Warsh's press conference. One closely watched aspect was what it meant for Warsh's relationship with Trump and whether the Fed can withstand pressure from the president. During the press conference following the decision announcement, Warsh repeatedly told reporters that he didn't, quote, have anything for you on discussions with Trump. But he reiterated the Fed's independence. Speaker 7 (1:39) Part of the independence of the Federal Reserve is we stay in our lane. Independence is a two-way street. We'll let people that do trade policy and fiscal policy stay in their lane, too. That's how we can stand up here and call them the way we see them. Speaker 2 (1:53) But then Trump complicated this picture. Yesterday evening, Trump told reporters that he had talked to Warsh about this decision before it was announced. Speaker 6 (2:02) I talked to Kevin and I said, you might as well vote with the board because it's not going to matter. The board is very hostile. They're very political. They're doing the wrong thing. They're a bunch of politicians or people put on by politicians. For Speaker 2 (2:16) more, I'm joined now by WSJ Washington Bureau Chief Damian Palletta. Damian, we just heard President Trump's comments. What do we know about this conversation between him and Warsh? Speaker 3 (2:25) Now, this is only President Trump's version of the conversation. We don't know whether the conversation happened the day they decided to raise rates or perhaps earlier, maybe the day before or a week before. All we know is that President Trump said they talked about this interest rate decision. So just what President Trump said, if true, would be an incredible conversation and potentially a breach of this independence that has built up between the Fed and the White House for many decades. But right now, we only have the White House's version of this conversation. has not weighed in to either confirm this or give an alternate version of the conversation. Speaker 2 (2:59) Some investors interpreted yesterday's decision as a sort of reassertion of the Fed's independence because it goes against President Trump's previous statements. Does this conversation now call that into question? Speaker 3 (3:10) What's really interesting is this, was this a one-off? Was this just Kevin Warsh? saying, hey, listen, I got to raise interest rates. I just want you to understand where I'm coming from so that President Trump doesn't attack the Fed, which the president did not attack the Fed, you know, to Kevin Warsh's credit. However, is this going to happen every time there's a Fed meeting? The Fed chair, Kevin Warsh, is going to call the White House and either explain his decision or ask the White House's input on the decision. That's a real slippery slope for two reasons. One, it gives the president, in