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Former Fed governor Kevin Warsh is set to testify Tuesday before the Senate Banking Committee as President Donald Trump’s nominee to succeed Federal Reserve Chair Jerome Powell, whose term ends in May. Senators are expected to press Warsh on his views of the Fed’s 2% inflation target amid persistent price pressures in the U.S. economy since the pandemic.
Warsh, 56, previously served as a Fed governor from 2006 to 2011. In prepared remarks reviewed in advance of his testimony, he outlined how he interprets the price-stability component of the Federal Reserve’s dual mandate, while not specifically addressing the Fed’s long-run policy target of keeping inflation at 2%.
Warsh wrote that Congress tasked the Fed with ensuring price stability “without excuse or equivocation,” adding: “Inflation is a choice, and the Fed must take responsibility for it.” He also said low inflation is “the Fed’s plot armor,” warning that when inflation surges, it can “grievous[ly] harm” citizens—especially those least well-off—by eroding purchasing power and potentially undermining confidence in economic governance.
He argued that stable prices are central to the Fed’s ability to support full employment and economies operating near their potential. Warsh said volatile prices make it harder for households and businesses to make prudent decisions.
Warsh said he “tends to ‘prefer ranges versus point estimates,’” citing measurement error and the view that broad price stability cannot be that precise. He also suggested that treating inflation too precisely contributed to central banks “overly stimulat[ing] economies” in recent years, with decisions that left inflation running above target.
He said he would not know the difference between inflation running at 1.7%, 2.0% or 2.3% because inflation is not measured that precisely, adding that “Economics is not physics – at least not yet.” Warsh further argued that agreeing permanently to 2.0% is “asking for trouble,” given changing global economic structures.
U.S. inflation peaked at 9.1% in June 2022 and is currently around 3%, according to the article. It rose over the last year, with the piece citing tariffs and a recent energy shock linked to the Iran war.
The testimony comes as senators consider Warsh’s nomination to lead the central bank. The article also notes renewed political pressure around the Fed, including President Trump’s renewed threats to fire Powell, alongside Warsh’s confirmation hearing.
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