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A senior candidate to follow Jay Powell as the future chairman of the Federal Reserve has blamed the US Central Bank for committing “systemic errors” and failure to control the worst inflationary growth in one generation.
Kevin Warsh, a former Fed Governor and President Donald Trump’s ally, accused the US Central Bank to act “more as a government agency with general goals than a narrow central bank”, saying “Drift” had stopped him from keeping inflation in its goal of 2 percent.
“Since the 2008 panic, the predominance of the Central Bank has become a new feature of US government,” Warsh said in a group of 30 events in Washington on Friday.
“Forays away – for all seasons and all reasons – have led to systematic errors in bringing macroeconomic policy.”
He increased the Fed $ 7TN balance of Fed had also enabled rampant federal government expenses that had left the US fiscal position in a “dangerous trajectory”.
“Fiscal policymakers – that is, the elected members of the Congress – found it significantly easier to acquire money, knowing that government financing costs would be subsidized by the Central Bank,” WARSH said, referring to the purchases of Central Bank Treasury debt under quantitative relief.
Comments from Warsh, who considered Trump as a potential treasure secretary, come to an acute moment of tension between the Fed and the President, who last week said he could not wait for Powell’s “completion” as chairman of the Central Bank.
Trump partially withdrew his comments, saying he did not intend to rest Powell, causing relief in global markets.
Warsh, who was in the Fed when he began, was a critic of Central Bank policies last year, but his remarks were his first statements about his monetary policy a month.
Warsh also attacked FED’s involvement in issues such as climate change and inclusion – though he admitted that the Central Bank had now “changed its melody” leaving the network for greenery of the financial system in January.
Powell’s current mandate as a Fed chair ends in May 2026, with Treasury Secretary Scott Bessent saying earlier this month that a search for his replacement would begin in the fall.
WARSH and National Council Chief Kevin Hassett is considered the favorites to follow it.
Trump’s recent criticism of Powell for refusing to reduce interest rates, accompanied by suggestions that the White House believed it had the authority to light the Fed chair, has sparked fear of central bank independence-led to a sharp sale in capital and dollar.
Warsh said that while he strongly believed in the “operational independence” for the Fed to establish interest rates without political pressure, this does not mean that central bankers should be treated as “pet princes”.
“When monetary results are weak, the Fed must undergo a serious question,” he said.
