Warsh says he speaks often with Treasury as Senate probes Fed independence

Federal Reserve Chair Kevin Warsh told the Senate Banking Committee on Wednesday that he speaks with Treasury Secretary Scott Bessent weekly and often between scheduled meetings, while declining to say whether he has spoken with President Donald Trump since taking the job. The testimony came with inflation above the Fed’s 2% target for 63 months and investors focused on whether a divided Federal Open Market Committee will raise or cut interest rates this year.

Warsh, seven weeks into his tenure as Fed chair, said his contacts with the Trump administration do not compromise the central bank’s independence. The Fed chair and Treasury secretary traditionally meet for a weekly breakfast, and Warsh said he has continued that practice with Bessent.

“I do meet with the Treasury Secretary weekly. I talk to him often between that,” Warsh told senators. He added that he would make his own decisions on interest rates.

Asked directly whether he had spoken with Trump since becoming chairman, Warsh did not answer. He said, however, that such a call would not itself be improper. “I certainly don’t feel uncomfortable receiving a call from the chairman of this committee or the president of the United States,” he said.

Independence under scrutiny

Warsh used two days of congressional testimony, first before the House on Tuesday and then before the Senate on Wednesday, to defend the Fed’s institutional autonomy. “The independence of the Federal Reserve is sacrosanct,” he told lawmakers on Tuesday, adding that the central bank’s authority rests on its credibility and its mandate from Congress.

The issue is politically sensitive because Trump said before Warsh’s confirmation that support for lower interest rates would be a test for his nominee to lead the Fed, and he has continued to call for rate cuts. The White House has said Trump defers to Warsh’s judgment on managing the Fed, while still generally favoring lower rates.

The White House declined to comment on any conversations between Trump and Warsh, saying it does not discuss private presidential conversations that may or may not have taken place. Spokespeople for Bessent and the Fed also declined to comment.

Warsh’s credibility with other policymakers matters because the FOMC sets rates by vote. CNBC reported that Governor Christopher Waller and New York Fed President John Williams have said in recent days that raising rates this year may be necessary, underscoring disagreement inside the central bank over policy.

Inflation data and policy reviews

Warsh told lawmakers that recent inflation readings had moved in a favorable direction, after consumer and producer price index data for June showed inflation easing. He cautioned against treating those figures as conclusive. “Any central bank would be happy to have the data going in the right direction. My view is these are all imperfect measures of the state of underlying inflation,” he said.

Warsh has created a task force to review how the Fed assesses inflation. He has also established a review of balance sheet policy, an area he previously linked to the idea of a new Treasury-Fed Accord. Before becoming chair, Warsh said he wanted to revisit the 1951 agreement that helped define the Fed’s modern independence and suggested giving the Treasury secretary some authority over balance sheet powers. He has not expanded on that proposal since taking office.

Bessent and Warsh have a shared professional link through investor Stanley Druckenmiller. Warsh worked for Druckenmiller for more than a decade before becoming Fed chair, while Bessent worked for him earlier in his hedge fund career. CNBC reported that the two men did not overlap at Druckenmiller’s firm but knew each other well before entering their current roles.

Kevin Hassett, a senior Trump economic adviser, said Wednesday on CNBC’s “Squawk Box” that he had recently spoken with Warsh and praised the chair’s new task forces.

Fed public calendars show former Chair Jerome Powell met or spoke with Bessent only a few times outside the regular breakfast schedule, including one 2026 meeting with bank chief executives in April to discuss risks tied to artificial intelligence.

This story draws on original reporting from CNBC.