Congress
Republicans give Warsh room on interest rates
The Federal Reserve just made congressional Republicans’ lives even harder in the run-up to the November midterm elections. But they’re holding their fire on Fed Chair Kevin Warsh.
The Fed this week hiked interest rates for the first time since Warsh took over as the central bank’s leader. The central bank’s unanimous decision to increase borrowing costs threatens to worsen the growing problems Republicans face around voters’ views of the economy and the high cost of living.
But some GOP lawmakers indicated they were relieved to see Warsh’s willingness to buck President Donald Trump after he faced withering criticism during his confirmation process from Democrats, who said he would do the president’s bidding in the role.
“The Fed has to be independent. They showed that they were independent,” said Sen. Mike Rounds, a South Dakota Republican who is up for reelection. “That should give confidence to the markets.”
Republicans’ willingness to give Warsh room — despite its potential political downsides for them — highlights their deference to the new Fed chief.
“It’s not good,” said Sen. John Cornyn, a Texas Republican who lost a primary earlier this year to a Trump-backed opponent. “But it’s a fact that they need to get inflation under control. But the timing is not optimal.”
The decision to hike rates comes amid an uneasy dynamic where the Fed is taking action to tamp down rising inflation while Trump wants to see the economy boosted by cheaper borrowing costs. Republican lawmakers, meanwhile, are caught between supporting Trump’s economic agenda and voicing confidence in Warsh’s ability to bring inflation under control.
Sen. Katie Britt (R-Ala.), a staunch supporter of the president who sits on the Senate Banking Committee, said that while she and Warsh “may have a different opinion on how we achieve a place where ultimately interest rates are low” and that she’d “love to see [lower rates],” she “trust[s] what [Warsh] is doing, and appreciate[s] the independence of the Fed.”
Warsh was tapped by Trump for the job in January with the hope that he would lower rates. However, since he was nominated, the U.S. entered into a conflict with Iran, high tariffs continued and gas prices soared, among other inflation and affordability concerns.
Trump-aligned lawmakers are cautioning against moving too aggressively to increase borrowing costs — but they are doing so gently.
Sen. Bill Hagerty (R-Tenn.) said in an interview that Warsh is “under a tremendous amount of pressure,” pointing to other Fed officials’ support for a hike.
“I understand the concerns about inflation, but I do think there’s a significant component of inflation that will be addressed as we address the situation in the Middle East,” Hagerty said.