Fed Chair Faces First Test Following Supreme Court Ruling

Kevin Warsh, Chairman of the US Federal Reserve, will face his first major international test in his new role this week.

He will speak at the European Central Bank’s economic conference in Sintra, Portugal, just two days after the US Supreme Court blocked President Donald Trump’s attempt to remove Fed Governor Lisa Cook.

The court ruled that the president must meet a high standard of justification to remove a Fed member. Although the case is being sent back to the lower courts, Cook remains in office. Trump has announced that he will continue the legal battle.

The decision has strengthened the central bank’s independence and, at the same time, eliminated the risk that Warsh’s tenure would be marred by personnel interventions by the president.

The new Fed chair is also pushing to limit so-called “forward guidance”, or the provision of outlooks on future interest rate developments. He argues that financial markets should respond primarily to economic data, not to signals from the central bank.

Warsh will present this approach at a panel discussion on Wednesday alongside ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem.

(Reuters, bak)