Trump’s ally treatment of Fed Chairman Kevin Warsh is risky: Analysis

After years of hostility toward the Federal Reserve, President Donald Trump has lately taken a new tack. He treats Chairman Kevin Warsh as almost a member of the Cabinet.

There is nothing in U.S. law that requires the Fed chairman to hang up if the president calls, and it is arguably beneficial for the nation’s two most influential economic policymakers to understand where each is coming from.

But Trump’s embrace of Warsh comes with risks for the economy. Fed independence isn’t some abstract moral norm. It exists to protect politicians from their instincts to run the economy too hot and to give central bankers reason to be deliberate in how they exercise their tremendous power over the economy. 

Trump has “spoken repeatedly” with Warsh since Warsh’s confirmation as Fed chairman, The Wall Street Journal reported Wednesday. That marks a sharp change from the president’s relationship with Warsh’s predecessor Jerome Powell, whom Trump appointed and then soured on. Calendars published by the Fed show only one direct meeting between Trump and Powell during the president’s second term through Warsh’s swearing-in on May 22 — in addition to a messy episode when Powell and Trump toured a Fed construction site together.

The White House doesn’t deny Trump and Warsh have spoken.

“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. Trump respects Warsh’s independence, Desai said.

Trump took legal steps to undermine the Fed’s independence under Powell. And yet the president seems to have turned over a new leaf with Warsh’s arrival. Trump hasn’t dropped his demands that the Fed cut interest rates, but he has said repeatedly that he trusts Warsh.

The difference isn’t policy but personnel. Trump was convinced that Powell was out to get him and was making interest-rate decisions to spite the president. Warsh can make the same decision — he hasn’t changed the interest rates he inherited from Powell — and get a different result from Trump.

Warsh has other allies in the Trump administration. Treasury Secretary Scott Bessent sharply criticized a Wall Street Journal reporter’s coverage of the Fed in an X post Wednesday before the paper’s story on the Trump-Warsh relationship ran. A Treasury spokeswoman didn’t respond to questions about the post, but the upshot was clear. Here was the administration defending someone it sees as an ally against the hostile press.

The Fed declined to comment about the report that Trump has been calling Warsh. The chairman has said he’s secure in his relationship with the president. He told the Senate last month he’s willing to hear just…