Kevin Warsh, who Donald Trump is eyeing to replace Powell as Federal Reserve chair, ripped the central bank on Friday for what he called “systematic errors” that fueled the worst inflation spike in a generation, according to the Financial Times.

Warsh, a former Fed governor and longtime Trump ally, said the Fed had morphed into “a general-purpose agency of government” instead of staying focused as an independent central bank. He said that drift away from its mission let inflation blow way past its 2% target.

Speaking directly to the crowd at the Group of 30 event in D.C., Warsh said, “Since the panic of 2008, central bank dominance has become a new feature of American governance.” He warned that the Fed’s endless expansions into every political cause had caused massive errors in managing the economy.

“Forays far afield — for all seasons and all reasons — have led to systematic errors in the conduct of macroeconomic policy,” Warsh said.

Warsh links Powell’s policies to reckless government spending

Warsh slammed the Fed’s $7 trillion balance sheet, saying it made it easier for politicians to keep throwing money around without thinking about the price.

Warsh said, “Fiscal policymakers — that is, elected members of Congress — found it considerably easier appropriating money knowing that government’s financing costs would be subsidised by the central bank,” referring to the massive Treasury bond-buying spree under quantitative easing.

The attack landed right in the middle of a serious fight between Trump and Powell. Just last week, Trump said he couldn’t wait for Powell’s “termination” as Fed chair. But later, Trump eased up, telling reporters he didn’t actually plan to fire him — which helped settle nerves across global markets that were already shaky.

Warsh, who was once on Trump’s shortlist for Treasury secretary, used the Washington stage to drop his first public comments on monetary policy in months. Warsh isn’t a new critic either. He sat at the Fed when quantitative easing first started and has kept close tabs on what he sees as failures ever since.

He didn’t stop at inflation and government spending. Warsh dragged the Fed’s climate change and social inclusion campaigns into the spotlight. He pointed out how the Fed used to be part of the Network for Greening the Financial System. Warsh admitted that the Fed had finally “changed its tune” by quitting the group in January, but didn’t suggest that it made up for anything else.

Powell’s days are still numbered even if Trump cools down. His term ends in May 2026. Treasury Secretary Scott Bessent said earlier this month that the White House will start hunting for a replacement this fall. Warsh is one of the frontrunners alongside Kevin Hassett, who currently leads the National Economic Council.

The real stakes are about control. Trump’s anger at Powell for not slashing rates, plus hints from the White House that they might have the authority to fire the Fed boss, have ripped open fears about the central bank’s independence. That fear helped crush equities and slammed the dollar in trading.

Even though Warsh said he fully supports the Fed’s “operational independence” when it comes to setting interest rates, he was clear that doesn’t mean central bankers get a free pass. “When the monetary outcomes are poor, the Fed should be subjected to serious questioning,” Warsh said.

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