Fed Chair Warsh meets 'often' with Trump, defends independence as inflation hits 3.5%

Federal Reserve Chair Kevin Warsh said he meets "often" with the Trump administration, exceeding the traditional weekly Treasury Secretary meetings, while defending the central bank's independence from political pressure as inflation cools to 3.5%.

"I'm ready to follow the law," Warsh told the House Financial Services Committee on July 14 when asked if he would resist pressure from President Donald Trump to lower rates. "Outside the four walls of the Federal Reserve, there is no doubt a lot of politics. My goal inside the central bank is for there to be no politics."

The testimony came as the Labor Department reported June consumer prices fell 0.4% from May, the first monthly decline in six years, pushing the annual inflation rate to 3.5% from 4.2%. Core CPI, which excludes food and energy, slowed to 2.6% from 2.9%. The fed funds rate stands at 3.5% to 3.75%, where it has remained since Warsh took office seven weeks ago after a series of hikes following the Iran war's outbreak in February.

Warsh declined to specify whether he has spoken directly with Trump since his appointment, saying he does not want to "be in the business of sharing discussions that the president and I have." The lack of transparency around his contacts with the administration could increase market uncertainty about the Fed's independence, with implications for bond yields, the dollar, and equities if investors begin pricing in political influence on monetary policy.

Inflation Progress and the Rate Outlook

Warsh downplayed the June inflation report as "one data point," declining to declare victory over the worst price surge in four decades. "I'm not going to show up here and say, 'mission accomplished,'" he said. "There's plenty of work to do." Inflation has remained above the Fed's 2% target for 63 consecutive months, a stretch Warsh called "a thing of the past" if the Fed gets policy right.

The Fed's preferred inflation gauge, the core PCE price index, stood at 3.4% in May, up from an October 2025 low of about 2.8%, according to Fed Governor Christopher Waller. Waller said July 13 that if core inflation readings remain hot, the Federal Open Market Committee "will need to consider tightening monetary policy in the near term."

Of the 18 anonymous projections in the Fed's June Summary of Economic Projections, eight saw the committee holding the target range steady at 3.5% to 3.75% through year-end, nine saw room to hike, and one saw room to cut. After the CPI report, most forecasters expect the Fed to leave rates unchanged at its July 29 meeting, though renewed U.S.-Iran hostilities have driven oil prices higher, with Brent crude rising more than 4% to about $87 per barrel.

A New Communications Doctrine

Warsh announced in June the creation of five task forces to review the Fed's communications, balance sheet policy, data sources, inflation frameworks, and productivity and jobs. The communications task force, led by former Bank of England Governor Mervyn King, former Central Bank of Brazil President Arminio Fraga, and University of Washington business professor Peter Fisher, will examine "the efficacy and the risks of how we currently deliberate and convey our policy choices."

Warsh has eschewed providing forward guidance on the Fed's next rate moves, saying he wants to be "more circumspect in our communications." The approach marks a departure from predecessors who used press conferences and speeches to signal the likely direction of policy. "We want to get policy right, and I think being somewhat more circumspect in our communications, at least me, is a better way of calling balls and strikes," he told lawmakers.

The last time a Fed chair adopted a similarly restrained communications approach was under Alan Greenspan in the mid-1990s, when the fed funds rate was adjusted between 3% and 6.5% without explicit forward guidance. That period preceded a sustained economic expansion, though analysts caution the current environment — with inflation above target for five years and geopolitical risks from the Iran conflict — presents different challenges.

This article is for informational purposes only and does not constitute investment advice.