One day after the Senate confirmed Kevin Warsh as the next Federal Reserve Chair, Treasury Secretary Scott Bessent offered what amounts to a public endorsement of Warsh’s expected approach to interest rates. Bessent said on May 14 that he expects “substantial disinflation” ahead, and that Warsh will “do the right thing” if he decides to cut rates.

The Warsh confirmation and what Bessent is really saying

Warsh’s confirmation came on May 13, backed by strong GOP support in the Senate. He’ll take over the Fed chair role from Jerome Powell, inheriting an economy still grappling with inflation pressures tied to geopolitical instability, including tensions surrounding Iran.

Bessent described Warsh as a “great candidate” who will ensure accountability in Fed policymaking. Back in April, Bessent had advised the Fed to adopt a “wait and see” approach on inflation, particularly given how the Iran conflict was distorting price signals.

But the keyword in Bessent’s framing is “if.” He said Warsh will do the right thing “if he cuts rates,” which leaves enough ambiguity to avoid accusations of directly dictating monetary policy.

The bigger picture: Fed independence in question

Warsh himself is not a stranger to the Fed. He served as a Fed governor from 2006 to 2011, navigating the institution through the financial crisis. He’s been described as more hawkish than dovish in his previous tenure, which makes Bessent’s confidence in rate cuts all the more noteworthy.