Fed Nominee Warsh Highlights Need for Policy Framework Change

Kevin Warsh, a nominee for the U.S. central bank (Fed), on the 21st (local time) pointed to the limitations of the Fed's 'balance sheet (asset holdings)' policy, one of its policy tools, and raised the need for a change to other policy instruments. Appearing at a hearing before the Senate Banking Committee that day, Warsh compared interest rate policy and balance sheet policy, assessing that interest rate policy has a broader and fairer impact on the economy as a whole.

In contrast, he explained that balance sheet policy has an imbalance problem where those who hold more assets receive greater benefits.

On this day, Warsh also touched upon the direction the Fed should take to address cost of living issues. He diagnosed that fundamental policy reforms are necessary to resolve this. He explained that hardworking Americans are still feeling the burden of rising prices. He emphasized that this reality signifies a systemic change in how the Fed conducts policy. Warsh believes a new inflation framework is needed and, if confirmed as a Fed nominee, looks forward to collaborating with his colleagues to achieve it, he added.