Walsh Testifies to Federal Reserve Independence

On Tuesday, December 21st, Eastern Time, the U.S. Senate Committee on Banking held a hearing regarding the nomination for the Chairman of the Federal Reserve. Facing inquiries from senators of both parties, the nominee, Woash, emphasized the importance of maintaining the independence of monetary policy, stating that he sought to implement various reforms within the Federal Reserve and would not act at the behest of President Trump.

In his prepared opening remarks, Woash committed to "ensuring that the conduct of monetary policy always remains strictly independent." He further stated, "the independence of the Federal Reserve largely depends on the Reserve itself." The Reserve should adhere to its mandate, and if it extends its reach into fiscal and social policy areas beyond its legal jurisdiction, "its independence would face the greatest risk."

Woash said, "The independence of monetary policy is crucial. I believe that when elected officials—whether the president, senators, or representatives—express their views on interest rates, the operational independence of monetary policy is not particularly threatened."

Woash indicated that due to his belief in the Federal Reserve adhering to its functional boundaries, he was not in a position to comment on Trump's dismissal of Federal Reserve Governor Cook (Lisa Cook). Commentators pointed out that the core focus of this case lies in the question of how much authority the president actually has to exert influence over the independent institution of the Federal Reserve.

Reporter Nick Timiraos, known as the "new Fed mouthpiece," commented that during the hearing, when presenting his ideas on "reforming" the Federal Reserve, Woash largely maintained the positions he has repeatedly emphasized over the past few years—that is, replacing the models the Reserve uses to predict inflation, reducing the frequency of external communication, and gradually shrinking its $6.7 trillion balance sheet over time.

Timiraos believes that the key to whether Woash's nomination will be confirmed lies not in whether he can gather enough votes but in who will yield first on the matter of the criminal investigation into Federal Reserve Chairman Powell, whether Trump or Republican Senator Thom Tillis.

Timiraos noted several remarkable points during the two-and-a-half-hour-long hearing:

• Woash sidestepped all suggestions aimed at drawing a line between himself and Trump;

• Woash pledged to uphold the independence of the Federal Reserve but skillfully avoided the most difficult challenges, such as refusing to take a stance on Trump's attempt to fire Governor Cook or the Powell criminal investigation concerning the renovation of the Federal Reserve headquarters on the grounds that the cases are under review;

• The sentiment around Woash's independence may not be pleasant within the Federal Reserve, as his main argument is that the various difficulties the Federal Reserve has encountered recently are entirely self-inflicted.

Timiraos also mentioned that Woash did not call for a rate cut, nor did he diminish the reasons for supporting one. He argued that the Federal Reserve should focus on core inflation and cited indicators such as trimmed mean, which excludes outliers. These indicators show that inflation is actually closer to the Federal Reserve's target of 2%. Woash also countered a view held by several Federal Reserve officials that tariffs have driven up recent inflation figures. However, instead of declaring victory over inflation, he stated, "The trend of inflation is improving, but there is still much work to be done."

Woash states Trump never asked for, and he would never agree to promise a rate cut

During the Q&A session of the hearing, when Senator John Kennedy asked if Woash would become Trump's "puppet," Woash responded, "Absolutely not." 

Senator Ruben Gallego cited a Wall Street Journal report claiming that Trump had pressured Woash to cut rates after being confirmed as the nominee, suggesting that either Trump or Woash was lying about the matter.

Woash disputed the aforementioned report, stating that the author of the report needed to "find more reliable sources or adhere to stricter ethical standards for journalism." He said, "I am responsible for every word I say. The President never asked me for any such promise, and I would never make such a promise."

Senator Jack Reed questioned whether Woash would succumb to Trump's demand for a rate cut. Trump had stated that he would not choose someone who does not support a rate cut to be the Federal Reserve Chair. Woash replied that he had not made any promises to Trump.

Senator Elizabeth Warren called Woash "grossly unsuitable" for the position of Federal Reserve Chairman. She repeatedly asked about whether Trump had lost the 2020 election. Woash refused to answer the question, stating, "If