Wash ends Capitol Hill trip! To summarize in one article: What did he say in the past two days?

Wash ends Capitol Hill trip! To summarize in one article: What did he say in the past two days?

① For Wash, "passing" in the first episode relied on eloquence and a relatively hawkish stance; ② To truly establish and maintain the Fed's credibility in the next few months, he also needs to deliver an answer that truly convinces the market and Congress in his actual actions to fight inflation and resist political interference.

For Kevin Wash, credibility is crucial. And Warsh's first trip to Capitol Hill since taking office this week showed how difficult it is for the new Fed chairman to maintain credibility. Just seven weeks into his tenure, Warsh appeared before the House Financial Services Committee and the Senate Banking Committee for two consecutive days.

Faced with repeated attacks from Democratic lawmakers on his independence, internal reforms and policy transparency, the new head of the Federal Reserve managed to get by with his relatively hawkish stance and good eloquence. However, the trust challenges he faces in the political spotlight have just begun.

It can be said that as the "head of the central bank" appointed by President Trump, Warsh faced doubts about his too close relationship with the White House from the moment he entered Capitol Hill. "You're going to have an uphill battle to prove your independence," Massachusetts Senator Elizabeth Warren said bluntly during the hearing.

Trump has long publicly pressured the Federal Reserve to lower interest rates, which has drawn attention to the policy independence of the current Fed. In his testimony, Warsh repeatedly emphasized that fighting inflation would be his top priority and made it clear that he was "fully prepared" to deal with any political pressure that may follow.

At the critical moment of the inquiry, Warsh even threw out a golden sentence to set the record straight: "Trump elected an independent person to do an independent job." In addition to questions surrounding the Fed's independence, Warsh's recent series of internal reform measures have also become the focus of Democrats' attacks.

Among them, the plan to establish an AI Productivity and Employment Working Group led by billionaire venture capitalist Marc Andreessen has caused the most controversy. Rep.

Nydia Velázquez, D-N.Y., spoke sharply, accusing Warsh of "outsourcing the Fed's core responsibilities to a secretive task force that lacks transparency." Minnesota Senator Tina Smith hit the point even more: "Let a group of people who are very likely to make a lot of money through AI lead this group.

How can this be credible in the eyes of ordinary people at the grassroots level?" In this regard, Warsh tried his best to downplay the power of the group, emphasizing that the working group only has the function of making suggestions and suggestions, and that the Federal Reserve is the "sole decision-maker" for final policy changes.

At the level of policy tools, Warsh’s abandonment of the traditional “forward guidance” policy was also under siege. Warren and Rep. Rashida Tlaib of Michigan worry that reducing public forward guidance will result in core insider information flowing only to the powerful and privileged.

Warsh promised on the spot that the Fed "will never provide any special preferential treatment to powerful people" and that all policy decisions will be fully disclosed the moment they are released. However, this seemingly "fiery" hearing did not eventually evolve into a full-scale confrontation.

The political circles in Washington have shown a pragmatic attitude toward Warsh by "listening to his words and watching his actions." Industry insiders also briefly summarized the multiple areas of market concern involved in this two-day testimony speech in the following five aspects: Warsh said little about his views on rates during two days of testimony, in line with his long-standing stance that the Fed should not hint at its next steps in advance.

However, while he did not explicitly say that monetary policy will be tightened, Warsh made it clear that options to curb inflation include using interest rates. Warsh said interest rates should be the main driver of monetary policy.

Warsh also noted that policymakers will be asked to have a robust internal discussion about the extent and timing of the need to use the tools. Warsh emphasized that there will be "zero tolerance" for inflation and a firm commitment to restoring price stability.

Warsh downplayed the importance of single-month CPI data, saying he did not want to over-interpret any single data (US CPI fell more than expected in June before Tuesday's testimony).

"There may be some people who look at this morning's data and say, 'Okay, mission accomplished, everything is good,'" he said, "but I don't see it that way." Warsh believes that the labor market part of the Fed's dual mandate looks pretty good, but the price stability part is not in such good shape.

Warsh said he was unsatisfied with any current inflation measures - including the Dallas Fed's trimmed mean indicator - saying they don't reliably capture underlying price pressures. Warsh's view is that the Fed needs new measures to understand potential changes in inflation.

Warsh emphasized his independence, saying Trump picked an "independent person to do an independent job." Warsh said that Trump is not trying to influence monetary policymaking. "Even if he did try to do so, I would continue to keep my head down and do my job." Warsh also noted that he would not feel uncomfortable receiving a call from the president.

He will follow the Fed's past practice in making his personal schedule public. Warsh promised that politics would not be taken into account when setting interest rates. Warsh believes that rising prices caused by the AI construction boom will not necessarily stimulate inflation.

He pointed out that the impact of the artificial intelligence boom is different from external conflicts because the supply side will respond. "I don't think one-time price changes will necessarily push up inflation." Warsh also predicts that over time, AI will increase productivity and wages.

Warsh said he likes the overall structure of the current Federal Reserve Board of Governors and regional reserve banks. Warsh stressed the need to bring about changes in policy regimes and to reexamine current practices. He said an overhaul is needed because the Fed's past policies are to blame for current inflation.

Asked whether he would commit to establishing fixed standards for holding press conferences, Warsh said any future adjustments to the Fed's communication methods would not be an attempt to withhold information. The two-day trip to Capitol Hill comes to an end Under U.S. law, such congressional hearings for the Fed chair will be held twice a year.

As House Financial Services Committee Chairman French Hil wittily summed it up at the end of the first day of hearings: “Folks, this is the first episode of Season 1 of War’s tenure at the helm of the Federal Reserve.

We’re looking forward to the release of the second episode.” For Wash, "clearance" in the first episode relied on eloquence and a relatively hawkish stance, but to truly establish and maintain the Fed's credibility in the coming months, he also needs to deliver an answer that truly convinces the market and Congress in his actual actions to combat inflation and resist political interference.

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