In his opening address to the Federal Reserve's more than 20,000 employees as he begins his four-year term, Chairman Kevin Warsh pledged to adhere to "the finest traditions of the Fed" while also promising a broad review of areas where change may be warranted.
This memorandum offers an early glimpse into Warsh's efforts to advance what he terms a comprehensive reform agenda, arguing that the Fed has strayed from its mandate, while also mending relations with colleagues and staff he has previously criticized.
"Our top priority is getting policy right to fulfill our responsibilities and serve the national interest. We will ensure an environment that supports employees doing their best work and achieving their best professional lives," Warsh stated in the Tuesday memo.
"We will not cling to old ways if better alternatives are identified," Warsh said. "In the quarters ahead, I look forward to open and clear-eyed discussions about the Fed's strategy, policies, and operations."
Additionally, reports indicate Warsh has appointed two conservative analysts to advise him during the transition period as he succeeds former Fed Chair, now Governor, Powell.
Daniel Hail is a policy fellow at Stanford University's Hoover Institution, where Warsh also worked prior to becoming Fed Chair. Paul Winfrey previously worked at The Heritage Foundation and authored the Fed reform chapter for the think tank's controversial conservative blueprint, Project 2025.
Warsh has outlined his vision for reforming the Fed, including a desire to shrink its $6.7 trillion balance sheet, provide less specific forward guidance on future interest rate decisions, and explore alternative inflation measures that might more accurately reflect price pressures in the economy.
During the months he was considered for the chairmanship, Warsh frequently offered sharp criticism of the policy direction under Powell's leadership and the Federal Reserve System, including its 12 regional reserve banks, which he argued had strayed beyond monetary policy into other domains.
Now, as he leads the very institution he once criticized, Warsh struck a more positive tone in the memo.
"This new chapter for the Fed comes at a pivotal moment for our nation. New technologies and new business models are emerging at an unprecedented pace," Warsh wrote. "I could not be more optimistic about what we can achieve together."
Warsh's first meeting as chair—which will likely feature his first substantive comments on the economy and monetary policy—is scheduled for June 16-17. The Fed is expected to hold interest rates steady, but new economic projections will reveal the direction of policy under Warsh's leadership and whether his colleagues are concerned that inflation, which remains above the Fed's target, could worsen.
His term begins under unusual circumstances.
The Fed awaits a Supreme Court ruling on President Trump's attempt to dismiss Governor Lisa Cook, a move seen as a direct threat to the Fed's independence in setting monetary policy, perhaps its most fundamental tradition.
Furthermore, Warsh will lead an institution that includes former Chair Powell, who decided to remain on the Fed's Board of Governors despite government attempts to interfere with the central bank.
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