Federal Reserve Chair Jerome Powell made a point of avoiding any comments with political implications at his press briefing on Wednesday, but President Donald Trump’s nomination of Kevin Warsh on Friday to become the new Fed chief has put Powell’s remarks in a different light.
And whether this was intentionally aimed at Warsh or not, Powell also delivered a robust defense of the Fed’s personnel.
“It’s easy to criticize government institutions in so many ways,” he said. “I will tell whoever it is: You’re about to meet the most qualified group of people you not only have ever worked with—you will ever work with—when you meet Fed staff. And not everybody’s perfect, but there isn’t a better cadre of professionals who are more dedicated to the public well-being than work at the Fed.”
Powell was also asked about whether the Fed’s economic models focused too much on backward-looking data and don’t incorporate game-changing developments like AI.
He said such criticisms “just don’t make sense,” while acknowledging the structure of the macro economy is constantly changing.
For example, the COVID pandemic was the first of its kind in a century, as were Trump’s tariffs, creating great uncertainty. Powell also maintained that when it comes to technological developments that raise potential output, such as AI, “we’re all over that.”
“We’re very clear-eyed about the possibility that this higher productivity may persist, and also that it may not,” Powell added. “No one’s sitting here unaware of the possibility of higher productivity.”
The Fed is well aware better productivity means higher potential output, changing how one thinks about inflation, economic growth, and the labor market, he explained.
“That’s all in our models,” Powell said. “I mean, if it’s just a question of using better models, bring them on. Where are they? We’ll take them. We certainly are in contact with anybody who does economic modeling, and we’re always looking to do better.”
For now, Warsh still needs to be confirmed by the Senate to become the next Fed chair when Powell’s term expires in May. And it’s not certain if or when Warsh will get a hearing, as a key Republican senator has threatened to block any of Trump’s Fed nominees until the Justice Department’s criminal probe into Powell is resolved.
On Friday, Sen. Thom Tillis (R-N.C.) called Warsh a qualified candidate with a deep understanding of monetary policy, but vowed to continue blocking any nominees and said protecting the Fed’s independence is nonnegotiable.
