Fed leadership signals steady rate stance as Warsh wins backing from Sen. Rounds
Kevin Warsh faces his first major public test as Federal Reserve chair this week with two days of congressional testimony focused on inflation and central bank autonomy. The appearances come shortly after he takes over in May from Jerome Powell, whose refusal to cut interest rates had angered President Donald Trump.
Highlights
- Sen. Mike Rounds expresses support for new Fed Chair Warsh, citing his focus on inflation and the Federal Reserve's independence during Congressional testimony.
- Rounds endorses the Fed's decision to keep interest rates unchanged in June, aligning with recent legislative efforts to reduce consumer and housing costs.
- Warsh's testimony emphasizes economic-driven policy decisions and reassures Congress about the central bank's independence amid ongoing inflation concerns.
Congressional testimony shapes early Fed message
As reported by CNBC, Sen. Mike Rounds says Warsh strikes the right tone on inflation and the Federal Reserve's independence during two appearances before Congress this week.Rounds, a Republican from South Dakota, says the Fed is correct to keep interest rates unchanged in June, which marks Warsh's first policy meeting as chair. He says Warsh's message fits with lawmakers' efforts to lower consumer costs, including recent housing legislation aimed at helping homebuyers and renters.
During his testimony, Warsh stresses that Federal Reserve decisions should rest on sound economics rather than political pressure. That message addresses a key concern around the institution's independence as the central bank navigates current economic challenges.
Inflation focus carries implications for borrowers
Rounds says bringing down inflation remains essential to lowering long-term costs for consumers, with mortgage rates a particular concern. His comments suggest support in Congress for a cautious policy approach even as households continue to watch borrowing costs closely.Warsh takes over the Fed in May after Powell's term ends under pressure from Trump, who had criticized the central bank for not lowering rates. The early reaction from Rounds indicates Warsh's testimony is helping frame his leadership around price stability and institutional independence.
In our earlier article on EUR/USD consolidating after a softer U.S. inflation report, we explained that the euro strengthened as falling Treasury yields and reduced expectations for further Fed tightening weighed on the dollar. We also noted that traders were looking to upcoming U.S. macro releases and fresh comments from Fed Chair Kevin Warsh for confirmation that price pressures were easing, while the ECB remained cautious about lingering inflation risks.
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