Fed nominee Kevin Warsh urges 'regime change' in policy

Federal Reserve Chair nominee Kevin Warsh urges a fundamental shift in the US central bank's operations during his Senate confirmation hearing Tuesday, citing a need to move past previous "policy errors."

“I think that means a regime change in the conduct of policy,” Warsh told lawmakers, arguing that a reform-oriented Fed could significantly benefit Americans. He asserted that the economy is still grappling with a legacy of mistakes from 2021 and 2022. "We need, in my judgment, fundamental policy reforms to fix it."

Warsh emphasized that while the rate of price increases has slowed, "hard-working Americans are no doubt feeling it." To address it, he proposed a new inflation framework and a different approach to utilizing the central bank’s financial instruments.

He suggested that the Fed should rely more on interest rate adjustments rather than balance sheet tools. He explained that interest rates are "fairer" because they affect the entire economy, whereas balance sheet tools tend to provide disproportionate help to those holding financial assets.

"We need a new framework, new tools, and I'd also say ... new communications," Warsh added.

US President Donald Trump selected Warsh on Jan. 30 to replace Jerome Powell, following public disagreements about interest rate directions.