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Barrage of questions including Iran war, AI impact... Fed independence on the chopping block
U.S. President Donald Trump has spoken with Federal Reserve (Fed) Chairman Kevin Warsh multiple times since Warsh took office in May of this year, the U.S. daily Wall Street Journal (WSJ) reported on the 5th (local time).
The WSJ reported that anonymous sources conveyed this, noting that it deviates from recent precedents by maintaining a line of communication between the president and the head of the central bank.
Sources said that President Trump calls Chairman Warsh in bursts.
Sometimes he calls multiple times within a few days, and then there are longer periods of silence.
The WSJ reported that President Trump consulted Warsh on various issues, including the Iran war and the economic impact of the rapid rise of artificial intelligence (AI).
The WSJ stated that it is unclear whether the two discussed monetary policy, but quoted an individual familiar with the conversations as saying that President Trump has not brought up interest rate issues since Chairman Warsh was confirmed by the Senate.
In the United States, the president has the authority to nominate and appoint the Fed Chairman with Senate confirmation, but the Fed independently determines interest rates.
While it is not unusual for a president and a Fed Chairman to meet occasionally, such contacts have been formal and pre-arranged in recent decades.
This is to avoid the impression that the president influences interest rate decisions.
According to the WSJ, recent presidents, from Bill Clinton (in office 1993-2001) to Barack Obama (in office 2009-2017), avoided publicly pressuring the Fed.
Contact between the White House and the Fed Chairman was more frequent in the 1960s, but diminished after the fact that President Richard Nixon (in office 1969-1974) persistently pressured Chairman Arthur Burns (in office 1970-1978) to ease monetary policy ahead of the 1972 election, in which Nixon successfully sought re-election, was revealed in stark detail.
Nixon succeeded in his re-election, but inflation worsened thereafter.
Chairman Burns, in a December 1971 phone call with President Nixon in the Oval Office, said he was pressuring Fed governors to cut interest rates at a meeting the following week, to which Nixon replied, "You're doing great," adding, "Just kick their asses a little."
These conversations were recorded and later made public, causing considerable shock.
In the 1980s, communication between the president and the Fed Chairman generally occurred through the Secretary of the Treasury.
President Trump has expressed stronger dissatisfaction with the Fed's independence than any recent president.
In a December WSJ interview last year, he even stated that he wanted the Fed Chairman to consult with him when setting interest rates.
However, six months later, at Chairman Warsh's inauguration ceremony, President Trump said the exact opposite: "I want Kevin to be completely independent. Don't look at me, don't look at anyone. Just make your own judgments and do a great job."
Chairman Warsh frequently expressed positive views on the economy in his conversations with President Trump, which aligns with his public statements.
At a press conference last week, he said, "The most prominent feature of the economy is the strong growth in business investment."
Warsh said at his confirmation hearing in April that the Fed's independence "depends on the Fed" and that elected officials expressing their views on interest rates is not a threat to independence.
President Trump has told his supporters that Chairman Warsh is a valuable external economic advisor.
He also praised Warsh last week before the Fed decided to freeze interest rates, saying he knew Warsh wanted to "do the right thing," and added, "He (Warsh) has a board, and the board members are very political."
This contrasts with the attitude President Trump took towards Jerome Powell, whom he appointed as Fed Chairman in 2018 during his first term.
Powell stepped down as Chairman in May of this year as his second term expired, but he remains a Fed governor.
During Trump's first term, he showed cautious conduct, such as disclosing meetings or phone calls with President Trump.
During President Joe Biden's tenure, his meetings with Biden were rare, countable on one hand.
President Trump mocked Powell as "too late" for refusing to cut interest rates, or not cutting them enough when he did.
He threatened to dismiss Powell multiple times and even compared his conversations with him to "talking to a wall."
Chairman Warsh has also been observed frequently meeting with other political figures.
On the 4th (local time), he had dinner with Army Secretary Dan Driskell, known to be friendly with Vice President JD Vance, at a popular restaurant in Washington D.C.'s Georgetown area.
According to the political news outlet Politico, Warsh also attended a dinner last month in Georgetown for Nick Luna, reportedly designated as Vice President Vance's chief of staff, and Cliff Sims, Vice President Vance's national security advisor.
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