"Federal Reserve Chair hot candidate" Waller once again supports Trump: Independence does not hinder quick interest rate cuts

According to the Zhitong Finance APP, Kevin Warsh, a popular candidate for the next Federal Reserve Chairman, has made significant remarks again. In a recent interview, he stated that the independence of the central bank is "crucial," but he added that the scope of this independence is very limited and emphasized that under the leadership of current Federal Reserve Chairman Jerome Powell, the Fed has ventured into policy areas beyond its authority. Warsh also stated that maintaining independence does not conflict with an immediate interest rate cut, and the Fed should not overly worry about tariffs causing persistent inflation.

Previously, Kevin Warsh was regarded by some Wall Street investment institutions as the "shadow Fed Chairman," as this former Fed governor was considered by Trump for the position of Treasury Secretary and has repeatedly supported Trump's view on "significant interest rate cuts" in public speeches. Therefore, many Wall Street institutions believe he is the most likely candidate for the next Federal Reserve Chairman. Warsh's previous statements supporting interest rate cuts have even been seen as a "loyalty pledge" to Trump, and he has stated that if the Fed cannot prevent price increases caused by tariffs from evolving into persistent inflation, it is a policy failure of the Fed rather than the tariffs themselves.

The concept of "shadow Fed Chairman" was proposed by current U.S. Treasury Secretary Scott Basset. This idea arose from Trump's dissatisfaction with the Fed's failure to cut interest rates and concerns about the economic outlook following tariff increases. Basset believes that this "shadow Fed Chairman" could provide enough forward guidance on monetary policy to make the market "less concerned about Powell's words."

At that time, Basset advocated for the early appointment of the next chairman, allowing this "shadow Fed Chairman" to speak publicly and participate in policy communication and expectation management during Powell's remaining term, thereby weakening Powell's influence and gaining monetary policy initiative for Trump's economic agenda.

Trump has repeatedly criticized Powell's hawkish stance on not cutting interest rates as inconsistent with the current state of the U.S. economy, and maintaining high interest rates for a long time is a significant drag on the economic growth blueprint led by the Trump administration. The concept proposed by Basset provided Trump with a new idea: to "soft replace" Powell within the statutory term without touching the legally more challenging impeachment process. However, this concept has sparked intense debate in academia and the market regarding the independence of the Federal Reserve, and it has also drawn significant attention to Basset in discussions about Powell's successor.

"History tells us that the independent operation of monetary policy is certainly crucial," Warsh said in a media interview on Thursday local time. "But that does not mean the Fed is independent in all other matters."

Warsh served as a Fed governor from 2006 to 2011, during which he consistently pursued a hawkish interest rate policy aimed at curbing inflation risks. However, this year, he has shifted to advocating for significant interest rate cuts, completely aligning with the position of U.S. President Donald Trump. Trump is considering who to nominate to succeed Powell when his term ends next May.

Warsh reiterated his criticism of the Fed under Powell's leadership, accusing it of being overly concerned that Trump's tariffs might raise inflation and emphasizing that the inflationary impact of tariffs is one-time rather than persistent "If they were a very credible central bank, they could say: 'We ignore this one-time price change.' However, their reluctance to cut interest rates is, in my opinion, their blemish."

Walsh also stated that Trump's public pressure on the Federal Reserve's monetary policy is correct, and that the current hesitation of Federal Reserve policymakers to cut interest rates is gradually undermining the credibility of the Federal Reserve