When the President asked me to lead the Federal Reserve, I accepted with a very clear view of what this job actually entails. The Fed has immense power, and with that comes an equal amount of responsibility. We aren't just a group of economists setting interest rates in a vacuum. We’re the guardians of the American dollar, the guardians of financial stability, and the backstop when things go wrong. Taking on these roles requires humility, discipline, and a deep commitment to serving the American public—not catering to short-term political pressure.
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| Kevin Warsh, Chairman of the Federal Reserve |
Today, I want to outline a straightforward framework for monetary policy. My goal is simple: restore the Fed’s credibility, protect the purchasing power of your paycheck, and make sure our financial system supports the real economy instead of distorting it.
Getting Serious About Price Stability
For too long, the Fed has treated its 2% inflation target as a ceiling to tip-toe around rather than a firm line to hold. The result? Persistent inflation that eats away at working-class wages and forces retirees to choose between buying groceries or buying medication.
Let me be clear: stable prices aren't a nice-to-have secondary goal. They are the absolute foundation of everything else—sustainable job growth, financial health, and real prosperity. When inflation is low and predictable, families can plan ahead, workers can bargain with confidence, and businesses can invest wisely. When inflation runs hot, the people who suffer most are the ones who can least afford it.
Under my leadership, the Fed will treat that 2% target with real conviction. We won't tolerate persistent overshoots. That means setting the right policy rates and having the courage to move decisively when the economic data demands it.
Financial Stability Is Monetary Policy
For years, central banks hid behind a convenient myth: that setting interest rates to manage inflation was separate from keeping the financial system stable. The 2008 crash—and the market volatility we've seen since—proved that idea wrong.
Keeping money artificially cheap doesn't just stimulate the economy; it inflates asset bubbles, encourages reckless risk-taking, and makes the system fragile. When the Fed keeps interest rates too low for too long, it doesn't create new wealth. It just shifts wealth around—from savers to borrowers, from the cautious to the speculators, and from the future to the present.
We are going to factor financial stability directly into our rate decisions. That doesn't mean trying to control the stock market or pop every bubble. It means recognizing that cleaning up after a financial crisis costs far more than preventing one in the first place. It means being willing to raise rates even when inflation looks quiet, if the alternative is a system built on cheap debt and risky bets.
Shrinking the Balance Sheet
After the pandemic, the Fed’s balance sheet swelled to nearly $9 trillion. While we’ve made some progress shrinking it, it’s still far too large. That expansion was done with good intentions, but good intentions aren't the same as good results. An oversized balance sheet politicizes central banking, blurs the line between government spending and monetary policy, and creates habits that are hard to break.
We will keep winding down our balance sheet in a predictable, transparent way. The Fed shouldn't be the single largest holder of U.S. Treasuries or mortgage-backed securities. Those assets belong in the private market, where real market forces—not central bank decisions—determine their value.
We will let the data guide our pace, but our direction is set: we are bringing the balance sheet back down to a size dictated by actual currency demand, not a desire to manipulate long-term interest rates.
Earned Independence and Real Accountability
The Fed's political independence is vital, but it isn't a free pass to operate without accountability. Congress gave us extraordinary power, and we owe the public total transparency: clear explanations of our decisions, honest admissions when we get things wrong, and a willingness to question our own assumptions.
We will improve transparency without giving up our operational independence. That means explaining how we react to changing economic data, encouraging real debate inside the Federal Open Market Committee, and welcoming dissenting views rather than shutting them out.
The Fed shouldn't be a black box, and it certainly shouldn't be a political football. It needs to be an institution that earns the public's trust every single day through competence, integrity, and a strict focus on its job.
The Way Forward
The American economy is facing massive, complex challenges: rising national debt, an aging workforce, geopolitical tensions, and rapid shifts in AI and energy. The Federal Reserve cannot fix these problems, and we shouldn't act like we can. What we can do is provide a stable monetary foundation so that businesses, workers, and markets can adapt, innovate, and grow.
That means resisting the urge to constantly step on the gas pedal. It means accepting that sometimes the best policy is to step back. It means trusting market forces a little more and trusting economic models a little less.
The Fed I lead will have a smaller footprint, but a clearer purpose. We won't chase short-term political applause or market approval. We will do the quiet, often unpopular work of preserving the dollar's value and keeping the financial system secure.
The American people deserve a central bank they can trust. That is the standard I set for myself, and it is the standard I will enforce across this institution.
