Trump calls Fed's Warsh repeatedly, testing independence in 3 months

President Trump has called Fed Chairman Kevin Warsh repeatedly since his confirmation, departing from formalized White House–Fed communication channels.

President Trump has called Fed Chairman Kevin Warsh repeatedly since his confirmation less than three months ago, discussing the Iran war and AI's economic impact while avoiding rate talk, people familiar with the conversations said.

"The president has not, before I took this office, before I raised my right hand, he has not tried to influence the conduct of monetary policy," Warsh told Sen. Chris Van Hollen at a Senate Banking Committee hearing last month. "And if he tried to, I would continue to keep my head down and do the job."

The Fed held rates steady last week, with Warsh saying at his press conference that rate increases "could well be part of" the answer if inflation stays elevated. Short-term Treasury yields fell while long-term yields rose after the meeting, a pattern suggesting investors expect slightly looser policy than before and a bit more inflation later. Warsh has described "the strong growth of business investment" as the economy's most striking feature.

The relationship between Trump and Warsh could determine whether markets price political influence into Fed decisions. The last time a president leaned on a Fed chairman this directly was Richard Nixon's pressure campaign on Arthur Burns before the 1972 election, which preceded the inflation surge of the 1970s. Democrats on the Senate Banking Committee have pressed Warsh for more disclosure about his interactions with the president.

Trump's calls come in bursts — several times in a stretch of days, then quiet for longer periods, according to people familiar with the matter. The president has sought Warsh's counsel on how the war in Iran and the rapid rise of artificial intelligence are affecting the economy. A person familiar with the conversations insisted Trump hasn't broached interest rates since Warsh was confirmed by the Senate.

The pattern marks a sharp departure from recent precedent. Presidents appoint Fed chairs, but the central bank sets interest rates independently, a separation meant to keep politics out of decisions that shape borrowing costs across the economy. In recent decades, contacts between presidents and Fed chairs have been more formal and arranged in advance, choreographed to avoid the perception the president is influencing rate decisions.

Trump regularly bypasses formal communication channels, keeping up with a wide circle of contacts — including world leaders, business executives and lawmakers — through his personal cellphone. Bill Clinton liked Alan Greenspan and seated him next to first lady Hillary Clinton at his first joint address to Congress. Joe Biden had only a handful of interactions with Jerome Powell during his term.

A Direct Line to the Oval Office

Trump's relationship with Warsh contrasts sharply with his treatment of Powell, whom Trump chose over Warsh for the job in 2017. Trump derided Powell as "too late" for declining to cut rates and for not cutting them enough when he did. He repeatedly threatened to fire him and compared conversations with him to "talking to a wall."

Trump has spared Warsh that treatment. Before last week's Fed decision, Trump praised Warsh and said he knew Warsh wanted to do "the right thing" but added, "He's got a board, and the board members are very political." Powell remains on the board as a governor after his term as chairman ended.

At Warsh's swearing-in ceremony in May, Trump said the opposite of what he told the Journal in December. "I want Kevin to be totally independent," the president said. "Don't look at me, don't look at anybody. Just do your own thing and do a great job."

The Burns Precedent

The cautionary example is Burns, a respected economist Nixon appointed as Fed chairman in 1970 after years as a trusted adviser. Nixon leaned on Burns relentlessly to loosen policy before the 1972 election. Oval Office recordings captured a phone call in December 1971 in which Burns boasted of how he was pressuring his colleagues to cut rates the following week. "Great," Nixon replied. "Just kick 'em in the rump a little."

Nixon was re-elected in a landslide, but inflation later soared. The experience changed how the two institutions dealt with each other, leading to the more formalized communication channels that persisted through the 1980s and beyond.

Ellen Meade, a former Fed economist now at Duke University, said she had expected Warsh's relationship with Trump to give him room to lead the Fed toward higher rates if conditions warranted. The press conference last week made her less sure of this.

Warsh has become a presence on Washington's political circuit, in the manner of Greenspan, who for years was a fixture of the social scene. He dined Tuesday at a popular Georgetown restaurant with Army Secretary Dan Driscoll, an ally of Vice President JD Vance. Last month, Warsh attended a dinner in Georgetown honoring Nick Luna, the incoming chief of staff to Vance, and Cliff Sims, Vance's national security adviser.

The White House said the president believes in an independent Fed. "President Trump has repeatedly stressed that he is giving Chairman Warsh the space he needs to restore confidence and competence in Fed decision-making," White House spokesman Kush Desai said in a statement.

Whether Warsh's relationship with Trump is an asset or liability turns on what he does if the Fed's judgment differs from the president's wishes. At his confirmation hearing in April, Warsh said Fed independence is "up to the Fed" and that it isn't threatened when elected officials "state their views on interest rates."

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