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WASHINGTON — President Trump joked during a ritzy dinner with the DC elite that if his newly minted nominee to helm the Federal Reserve, Kevin Warsh, doesn’t slash interest rates, he’s going to sue him.
“It’s a roast. It’s a comedy,” the president later told reporters about the gibe, praising Warsh as a qualified nominee who should breeze through confirmation.
Trump’s joke about Warsh, whom he’s publicly praised as straight out of “central casting,” came at the swanky Alfalfa Club’s black tie dinner with top politicians as well as business elite, and was first reported by the Wall Street Journal.
The president announced Warsh as his pick to helm the Fed on Friday, declaring, “he will never let you down.”
For months, Trump and his administration have mounted a pressure campaign on the Federal Reserve to lower its benchmark interest rate target to juice the economy, alleviate mortgage rates, and potentially reduce the growth of the colossal interest on the national debt.
This included Trump’s controversial attempt to fire Fed Governor Lisa Cook from the central bank’s Board of Governors — a move that is now before the Supreme Court — and the Justice Department’s subpoena and threat of criminal indictment against outgoing Chair Jerome Powell over renovation cost overruns.
While the president has singled out Powell for much of his ire, it’s technically the Fed’s Board of Governors, not the chairman, that actually determines rates.
Throughout his second term, the Fed slashed its benchmark interest rate three times, from a 4.25%–4.50% target range to 3.5%–3.75%.
However, this has been woefully short of what Trump has wanted. Last week, the Fed’s Board of Governors opted against a rate cut, deciding to keep rates steady.
Powell has argued that while there is softening in the labor market to justify a rate cut, the Fed must balance that against the risk of inflation getting out of hand — and has suggested that Trump’s tariff frenzy has contributed to upward pressure on prices.
The consumer price index rose 2.7% in the year to December, which is hotter than the Fed’s 2% inflation goal.
The Fed has consistently been unable to bring inflation, measured by the annual CPI, to a flat 2% since the pandemic.
Still, the pressure campaign has raised concerns that Trump is threatening the Fed’s independence. Historically, countries that let politics control their central banks face inflation and other monetary policy woes.
Sen. Thom Tillis (R-NC) and other lawmakers have threatened to block Trump’s Fed picks until the criminal probe into Powell ends.
Warsh had been a serious contender to help the Fed during Trump’s first administration when he decided to replace then-chair Janet Yellen. Ultimately, he went with Powell, a decision he publicly regretted. Former President Joe Biden re-upped Powell, whose term now ends in May.
Trump has claimed that he has not asked Warsh to commit to lowering rates, but expressed confidence that he would.
“I’ve been following him. I don’t want to ask him that question. I think it’s inappropriate, probably,” Trump told reporters Friday when asked if he pressed Warsh on whether he’d push to cut rates. “I want to keep it nice and pure.”
Warsh had once gained a reputation as an inflation hawk, preferring the Fed keep a tighter balance sheet and higher rates.
However, he has recently changed his tune in light of the artificial intelligence boom, suggesting that the nascent technology will help curb inflation.
Warsh previously served on the Federal Reserve Board of Governors from 2006 to 2011 and emerged as an important player during the Great Financial Crisis.
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