Two leading candidates to replace Federal Reserve Chair Jerome Powell are openly criticising the Fed as the White House prepares to choose its next leader.
Kevin Warsh, a former Fed governor, wrote an opinion piece in The Wall Street Journal on Sunday. He claimed that the Fed is standing in the way of stronger economic growth.
He said the Fed is “defending its mistakes instead of correcting them” and has fallen into “the tyranny of the status quo.”
Warsh added that productivity gains and AI-driven innovation are key to the next economic expansion, which he believes the Fed is slowing down.
He wrote that inflation is “a choice” and criticised Powell for making “unwise choices.” Warsh called for a smaller Fed balance sheet, lower interest rates, and an end to what he sees as the Fed’s outdated belief that strong growth causes inflation.
Hassett supports Warsh’s view
Kevin Hassett, director of the National Economic Council and another top contender, shared similar opinions in a CNBC interview on Monday. He said the Fed had made “a lot of policy errors” and should “turn the page” by returning to an “independent and data-driven” approach. Hassett praised Warsh’s op-ed and added that he would not be a partisan pick.
Hassett also hinted that the timing of the White House’s announcement might depend on Powell’s plans. “The timeline may depend partly on ‘when Chairman Powell announces that he’s going to resign,’” he said on CNBC.
Treasury Secretary Scott Bessent has said the administration is ready to announce the new Fed chair by the end of December. Powell’s current term ends in May, but he could choose to remain a governor until January 2028.
Both Warsh and Hassett framed their comments as calls for Fed independence. However, their criticism mirrors Trump’s long-standing view that Powell misjudged inflation.