Former Federal Reserve governor Kevin Warsh, who is considered to be on the short list of President Donald Trump’s picks to replace Fed chairman Jerome Powell, called for “regime change” at the central bank on Thursday.
“We need regime change in the conduct of policy,” Warsh told CNBC’s Squawk Box. “The credibility deficit lies with the incumbents that are at the Fed, in my view.”
Warsh took a veiled shot at Powell, whom Trump has targeted in recent weeks over the Fed head’s cautious approach in lowering interest rates.
Powell recently raised concerns over Trump’s tariffs driving up prices for consumers and businesses. The chairman also monitors inflation levels before deciding to cut interest rates.
Warsh argues that Trump’s criticism of Powell is warranted.
“Their hesitancy to cut rates, I think, is actually … quite a mark against them,” he said. “The specter of the miss they made on inflation — it has stuck with them. So one of the reasons why the president, I think, is right to be pushing the Fed publicly is we need regime change in the conduct of policy.”
Warsh is already familiar with the central bank and its operations, having served on the Fed’s Board of Governors from 2006 to 2011. Although he previously held a more hawkish stance on inflation, Warsh appears open to Trump’s goal of cutting interest rates based on his latest comments.
“I think the Fed has the balance wrong,” he said. “A rate cut is the beginning of the process to get the balance right.”
Trump’s frustration with Powell is growing, especially after a $2.5 billion renovation to the Fed’s headquarters in Washington, D.C., went $700 million over budget. The White House’s Office of Management and Budget opened an inquiry into the matter last week.
Trump was speculated to fire Powell, given the president’s dissatisfaction. But Trump downplayed the possibility of that outcome.
“He’s doing a lousy job, but no, I’m not talking about that,” he told reporters on Wednesday when asked about firing Powell. “Fortunately, we get to make a change in the next, what, eight months, and we’ll pick somebody that’s good.”
A successor will be named sometime before Powell’s term ends in May 2026.
Other notable candidates to succeed Powell include National Economic Council Director Kevin Hassett, Fed governor Christopher Waller, Fed Vice Chairwoman for Supervision Michelle Bowman, and Treasury Secretary Scott Bessent. Warsh was also in the running for the Fed’s top post during Trump’s first term.
The former Fed official weighed in on whether Trump should fire Powell, saying “regime change at the Fed will happen in due course.”
WHITE HOUSE MOVES TO BOLSTER TRUMP’S CASE FOR JEROME POWELL FIRING
Warsh notably suggested that the Fed join forces with the Treasury Department to coordinate better on managing the national debt, which is currently over $36 trillion.
“We need a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation’s debt, and we were stuck with a central bank that was working at cross purposes with the Treasury. That’s the state of things now,” he said on CNBC. “So if we have a new accord, then the … Fed chair and the treasury secretary can describe to markets plainly and with deliberation, ‘This is our objective for the size of the Fed’s balance sheet.’”
