Trump Backs Fed Nominee Warsh Despite No Rate Cuts, Calls Him 'Brilliant'

President Donald Trump reiterated his support for Kevin Warsh, his nominee for the Federal Reserve, describing him as "brilliant." This endorsement comes despite Warsh not delivering the interest rate cuts that Trump urgently desires, with little prospect of such a reduction in the near term. Trump acknowledged that while Warsh might prefer lower rates, the Fed's policy board is inclined to keep them high, stating, "We are dealing with interest rates." Warsh, in a press conference following the Fed's decision to maintain current rates, suggested he might lean towards supporting interest rate hikes to counter persistent inflation, especially given a resilient labor market and economy. He explained that central bankers typically tighten monetary policy when underlying inflation rises and loosen it when inflation falls, describing this as his "reaction function."

Trump's comments followed the second monetary policy decision since Warsh joined the Fed in May, replacing Jerome Powell, whom Trump had frequently criticized for not cutting rates aggressively enough. On both occasions, the Fed kept rates steady between 3.50% and 3.75% annually. However, at the recent meeting, three of Warsh's colleagues voted to raise rates. Current interest rate futures markets indicate a greater than 60% probability of a 0.25 percentage point rate hike at the Fed's next meeting in September.