Kevin Warsh, selected by President Donald Trump to take over as Federal Reserve Chair from Jerome Powell, has articulated a sweeping agenda for the central bank if he is confirmed. In speeches, interviews and essays, Warsh has described a series of changes he believes are necessary - from a comprehensive rewrite of the Fed’s operating regime to a smaller balance sheet and lower interest rates. He has also advocated a narrower institutional remit and closer alignment with the Treasury Department on balance sheet goals.
As Mary Daly, president of the San Francisco Fed, observed on Friday, "he’ll come in with an idea of what he would like to think about and do. And then the economy will deliver what we actually work on, and that will be the journey of every Fed chair and all the Fed policymakers and all the Fed employees." That observation frames the context for what promises to be a detailed confirmation hearing, where lawmakers will press Warsh on the mechanics and potential effects of his proposals.
Regime change
Warsh has been explicit that he believes the Federal Reserve needs a new operating regime. He told CNBC on July 17, 2025, that "The broad conduct of monetary policy has been broken for quite a long time. The central bank that sits there today is radically different than the central bank I joined in 2006. I don’t think we need policy continuity that brought about the greatest mistake in macro economic policy in 45 years, that divided the country, that caused a surge in inflation. I don’t think we need continuity when the central bank doesn’t have credibility... we need regime change at the Fed."
This language signals a desire to move away from the policies and frameworks that have guided the Fed in recent decades and to implement substantial structural shifts in how monetary policy is formulated and communicated.
Lower interest rates
Warsh has also argued in public appearances that interest rates should be lower. In an interview with Larry Kudlow on FOX Business Network on July 8, 2025, he stated plainly, "Interest rates should be lower." In a Wall Street Journal opinion piece published on November 16, 2025, he expanded on that point, writing: "The Fed’s bloated balance sheet, designed to support the biggest firms in a bygone crisis era, can be reduced significantly. That largesse can be redeployed in the form of lower interest rates to support households and small and medium-size businesses."
His view links the desired level of policy rates to the size and composition of the Fed’s balance sheet, suggesting that a leaner balance sheet could enable a more accommodative interest rate posture.
Interpretation of inflation
On the topic of inflation, Warsh has criticized certain intellectual assumptions he says contributed to what he terms the Great Inflation. In a lecture at the International Monetary Fund on April 25, 2025, he argued that "The intellectual errors that contributed to the Great Inflation include some mix of the following: The central bank came to believe that its price stability objective was largely self-executing…that big, black-box DSGE (dynamic stochastic general equilibrium) models were anchored in reality…that monetary policy had nothing to do with money…that the central bank was a bystander to forces outside of its control…that the surge of Putin and the pandemic were blameworthy for inflation rather than the surge of government spending and printing."
In a CNBC interview on July 17, 2025, he also offered an outlook on technology and prices: "AI is going to make almost everything cost less... I think we are probably in the early innings of a structural decline in prices."
Smaller balance sheet
Warsh has repeatedly advocated for a materially smaller Fed balance sheet. Speaking at the Reagan National Economic Forum in Simi Valley, California, on May 30, 2025, he said, "My recommendation is a smaller balance sheet... interestingly if you have a smaller balance sheet, you can have lower interest rates... (The Fed’s balance sheet) is trillions larger than it needs to be."
He frames a reduced balance sheet as a policy tool that would permit lower interest rates while also addressing what he describes as an oversized footprint created to support large firms during prior crises.
Defending Fed independence
While advocating significant operational changes, Warsh has emphasized the importance of institutional credibility and independence. In remarks to the Shadow Open Market Committee in New York on March 26, 2010, he said: "The Fed’s greatest asset is its institutional credibility. This institutional credibility is rooted in its inflation-fighting credibility, but it is broader still. It is tied up in the full range of Fed actions and balance sheet commitments. This credibility is essential. It increases the heft of our communications. It gives weight to our economic assessments. It amplifies the effect of announced changes in the short-term policy rate on longer-term rates. It is, in some sense, the real money multiplier in the conduct of policy....Fortunately, for the asset to be burnished and bestowed upon the current crop of central bankers, it did not demand perfect clairvoyance or infallible judgments. But it did require fierce independence from the whims of Washington and the wants of Wall Street, and from a pernicious short-termism that can undermine the proper conduct of policy."
That defense of independence sits alongside his proposals to work more closely with the Treasury on some balance sheet objectives, a tension likely to be examined by senators.
Narrowing the Fed’s remit
Warsh has argued that the Fed should refrain from expanding its focus beyond its core functions. In his IMF lecture on April 25, 2025, he said, "The more the Fed opines on matters outside of its remit, the more it jeopardizes its ability to ensure stable prices and full employment. And the more vulnerable it becomes to the body politic. The Fed’s expansionist tendencies portend existential risks."
He ties a narrower institutional focus to reducing political vulnerability and preserving the central bank’s ability to deliver on price stability and employment objectives.
Coordination with the Treasury
Warsh has described a model of cooperation with the Treasury focused on transparency about the balance sheet and market signaling. In a CNBC interview on July 17, 2025, he explained: "If we have a new accord, and ... the Fed chair and the Treasury secretary can describe to the markets plainly and with deliberation this is our objective for the size of the Fed’s balance sheet, the Treasury can say this is our issuing calendar, and by the end of, let’s say, this administration we’ll be at an equilibrium rate on the balance sheet, so that markets will know what is coming...It would not be working in conjunction with the administration. It would be working with Treasury on goals that the Fed thinks are important to try and pursue and how would you present that to markets, as such, will be in conjunction."
This formulation presents coordination on defined goals and timelines rather than subordination to executive aims, though the specifics of any such accord would be a central focus of scrutiny in the confirmation process.
Transparency and internal communications
Warsh has criticized some modern Fed communication practices as producing what he calls a "cacophony" of voices and ambiguity. He reflected on the era of transparency initiated under Alan Greenspan in testimony to the Senate Banking Committee on February 14, 2006, saying: "Under Chairman Greenspan’s leadership, the Federal Reserve took meaningful steps during the past decade to describe and explain its policies with greater transparency. As a result, market volatility is lower, and our capital markets are deeper, broader, and more dynamic than ever before."
He has been more critical of forward guidance, writing in an essay entitled "The Federal Reserve needs new thinking" on August 24, 2016, that "The Fed’s 'forward guidance,' promising low interest rates well into the future, offers ambiguity in the name of clarity. It licenses a cacophony of communications in the name of transparency." In a Wall Street Journal opinion piece on November 16, 2025, he added: "Fed leaders would be well-served to skip opportunities to share their latest musings. The swivel chair problem, rhetorically waxing and waning with the latest data release, is common and counter-productive."
Warsh’s compilation of proposals and public commentary sets up a confirmation hearing in which senators will test the feasibility and potential consequences of a major reorientation of Fed policy and practice. His positions touch directly on monetary policy, the central bank’s market footprint, institutional independence, and the relationship between monetary and fiscal authorities - all topics with clear implications for finance, banking, households and businesses.
Clear summary - Kevin Warsh’s public remarks outline a comprehensive plan to alter the Federal Reserve’s policy framework, including regime change, lower rates, a smaller balance sheet, greater coordination with the Treasury on balance sheet targets, a narrower institutional remit, and tighter controls on Fed communications. His positions will be scrutinized in his confirmation hearing.