By Constance Hunter
About the author: Constance Hunter is the chief economist at the Economist Intelligence Unit. She was formerly chief economist of KPMG.
Kevin Warsh has been able to thread a very fine needle. On the morning of his Federal Reserve chair nomination Friday, there was still little consensus on whether he tilts dovish or hawkish. Or is he a hawk in a dove's clothing?
Cynics have whispered that Warsh, a former Fed governor, is hawkish when a Democrat occupies the White House and dovish when a Republican does. There is a nugget of truth in that; Warsh has wavered over the years. From his time at the Fed from 2006-2011 and in many of his public comments since, he tilted hawkish. But in the run-up to his nomination, he argued a more dovish stance would achieve the Fed's policy objectives.
Recently, Warsh has spun his long-argued view in favor of a smaller balance sheet into an argument that shrinking the balance sheet via quantitative tightening would allow the Fed to lower interest rates without threatening to elevate inflation. (This policy would steepen the yield curve. Higher long-term rates would do little to lower mortgage rates, a key objective of the Trump administration.) In attempting to thread the needle between an independent Fed that is wary of funding the Treasury via large-scale asset purchases and a more populist dovish tilt that appeals to the president, Warsh may have given up some credibility among economists of the guild.
There are several ideas he has adhered to throughout his career. Warsh has consistently argued that the Fed's mandate should be narrow, on the basis that a wide and overarching mandate threatens the institution's credibility. He has long believed that large-scale asset purchases should only be used during crisis and in moderation due to the risk that they can be used to fund a profligate Treasury. He has stuck to preferring limited bank regulation and a limited scope for the Fed, one that doesn't pay heed to climate change or include policies focused on buoying disadvantaged communities by fostering a tight labor market. Warsh's distaste for overconfidence in models and technocratic expertise has also held throughout his career.
In 2016, Warsh participated in a conversation I moderated for the National Association of Business Economics, in which he argued such groupthink needed to be challenged. When I asked him about how the Fed might institute a mechanism to question its groupthink, he suggested the institution borrow a technique by the national security experts in war games to question its models. He liked the tried and true "blue team-red team" strategy of designating people to explicitly challenge models and assumptions to overcome institutional biases.
Today's Fed is the ideal setting to enact a blue team-red team framework for questioning model assumptions. The uncertain impacts of AI on growth, employment, and inflation warrants pressure-testing existing models. That technological change is happening as geopolitics are shifting -- through the administration's extensive use of tariffs, the great power competition between the U.S. and China, and increased military spending that is adding to an already concerning federal deficit. Under such conditions, most economists would anticipate structural breaks in the data and models. Nevertheless, some economists linked the administration have concluded that AI will raise productivity sharply and allow for faster growth, lower inflation, and lower interest rates.
Regardless of his views on inflation and the labor market, Warsh will need to achieve consensus in his new role, if he is confirmed. As chair, he will have to weave together the threads of his own, now dovish views and those of his more hawkish colleagues. He will need to steer groupthink, or at least the thinking of the voting Federal Open Market Committee, to implement his preferred policies on rates and the balance sheet.
To do so, Warsh will need to deploy the humility he has argued is a critical skill for policymakers. His recent writings in The Wall Street Journal , however, exhibit a confidence about money growth and balance sheet causality that exceeds the humility he has emphasized in the past.
Warsh should take his own advice and remain humble, even as Fed chair. He can then safeguard the independence of the institution and do his part to ensure that U.S. firms and households have the lowest credible rates possible to promote full employment and stable prices.
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February 01, 2026 14:28 ET (19:28 GMT)
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