Top Fed Chair Candidates Press Attacks on the Bank

Kevin Hassett (left), Jerome Powell, and Kevin Warsh. (Getty Images (2); Bloomberg (1))

Key Points

• Kevin Warsh, a former Fed governor, criticized the Federal Reserve in an op-ed, saying it is an obstacle to stronger economic growth.
• Kevin Hassett, director of the National Economic Council director, echoed Warsh’s criticisms, advocating for the Fed to return to a data-driven approach.
• The critiques from both contenders align with Trump’s view that the Fed has misjudged inflation.

Two of the leading contenders to replace Federal Reserve Chair Jerome Powell took aim at the Fed, sharpening their criticism as the White House prepares for a decision on the central bank’s leadership.

Kevin Warsh, a former Fed governor, published an op-ed in The Wall Street Journal on Sunday, arguing that the central bank has become an obstacle to stronger economic growth. He accused Fed leadership of “defending its mistakes instead of correcting them” and said the institution had fallen victim to “the tyranny of the status quo.”

Warsh said productivity gains and AI-driven innovation are the drivers of a new economic expansion that the Fed is restraining. Inflation, he wrote, is “a choice,” and the Fed’s recent record has been marked by “unwise choices” under Powell. He pushed for a smaller balance sheet, lower rates, and the abandonment of what he described as the Fed’s outdated belief that strong growth drives inflation.

On Monday, Kevin Hassett, the director of the National Economic Council, who has also emerged as a top contender, echoed much of that message during an interview on CNBC. Hassett said the Fed had made “a lot of policy errors” and needed to “turn the page” by returning to an “independent and data-driven” approach. He praised Warsh’s op-ed and rejected the idea that he would be a partisan choice for the chair role.

The bank declined to comment.

Hassett also suggested that Powell’s next steps could determine the timing of a White House announcement on succession. Asked when the administration might unveil its pick, he said the timeline may depend partly on “when Chairman Powell announces that he’s going to resign.”

Treasury Secretary Scott Bessent has said that the White House is prepared to announce their pick for Fed chair at the end of December.

Powell’s term as Fed chair ends in May, but he could opt to remain a governor until January 2028.

The critiques come as Trump continues to publicly pressure the central bank to lower rates. The Fed has cut rates by half a percentage point this year, but Powell and other Fed officials have indicated in recent weeks that they may pause on easing at their December meeting.

Both of the Kevins, Warsh and Hassett, framed their arguments as calls for independence, but the substance of their criticism aligns with Trump’s longstanding view that Powell misjudged inflation. And both candidates describe a future in which strong productivity, AI-driven investment, and Trump’s policy framework justify lower interest rates.

Write to Nicole Goodkind at nicole.goodkind@barrons.com.