Kevin Warsh blames Fed officials for inflation screw-up

Kevin Warsh wants Powell gone. The former Fed governor, now one of Trump’s top picks to lead the central bank, didn’t dance around it during a Thursday interview on CNBC.

He said the Federal Reserve needs a full-on “regime change” and slammed the people still running it, especially Jerome Powell, for what he sees as a total failure in leadership. Kevin says the Fed’s current crew lacks credibility and that their slow moves on interest rate cuts prove it.

He’s not just talking about replacing Powell when his term expires in May 2026. Kevin is positioning himself as the guy who can rip up the Fed’s current playbook and build a tighter partnership with the Treasury Department. He’s echoing Trump’s constant criticism of Powell and aligning with the former president’s calls for lower rates. And he made sure to emphasize that if he’s in charge, the Fed won’t be acting on its own anymore.

Kevin blames Fed officials for inflation screw-up

During the interview, Kevin didn’t just go after Powell. He took a swing at the entire group of “holdover” Fed officials. “The credibility deficit lies with the incumbents that are at the Fed, in my view,” he said. Then he added, “Their hesitancy to cut rates, I think, is actually quite a mark against them.”

He also backed Trump’s strategy of publicly attacking the Fed, saying it’s necessary. “So one of the reasons why the president, I think, is right to be pushing the Fed publicly is we need a regime change in the conduct of policy,” Kevin said. He’s not pretending to be neutral here. He wants Powell out, and he’s using every talking point Trump’s ever tweeted about the Fed to make his case.

Kevin also didn’t brush off the White House’s other criticisms. The Trump camp has called out Powell for signing off on a pricey renovation at two of the Fed’s buildings in D.C., and Kevin didn’t bother defending him. When asked directly if Trump should fire Powell, Kevin kept it cool but firm: “I think regime change at the Fed will happen in due course.” That’s about as close to saying “yes” as you can get without actually saying it.

Kevin pushes Fed-Treasury coordination to handle U.S. debt

Kevin then dropped a bigger idea: bringing the Fed and Treasury into sync to deal with the country’s $36 trillion debt. Trump’s team has already said rate cuts would ease the cost of carrying that debt. Kevin went a step further, floating the idea of a new agreement between the two institutions, like the one in 1951.

“We need a new Treasury-Fed accord, like we did in 1951,” Kevin said, referring to the post-war pact that separated Fed monetary decisions from Treasury’s fiscal needs. But in his view, the current situation has the two bodies working at cross purposes. “That’s the state of things now,” he said.

In his ideal setup, the Fed chair and Treasury secretary would talk openly to markets and clearly outline the goals for the size of the Fed’s balance sheet. Right now, the Fed is shrinking that balance sheet by letting debt roll off without reinvesting, what’s known as quantitative tightening. Kevin said he supports the idea in general, but made it clear he thinks the Fed is doing it wrong without Treasury input.

“I think the Fed has the balance wrong,” he said. “A rate cut is the beginning of the process to get the balance right.” That’s a direct swipe at Powell’s current course of action. Kevin wants the Fed to pivot—and fast.

There’s a problem though. The last time the Fed cut rates, bond yields didn’t behave the way they were supposed to. Instead of dropping, Treasury yields actually went up. That throws a wrench into the argument that cuts will help ease debt costs. But of course, Kevin didn’t mention that part.

Kevin has now publicly ticked every box: back Trump, call for lower rates, question Powell’s judgment, and propose a Treasury-Fed coordination. If Trump’s goal is to shake the Fed’s foundations, Kevin wants to be the guy holding the sledgehammer.

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