What smart people are saying about the future of the Fed under Kevin Warsh

Krugman, a Nobel Prize-winning economist, has previously been critical of Warsh, saying that he "lacks the intellectual and moral credibility to be effective" as chair.

In a recent video posted to Substack, Krugman said, "Inflation is running hotter than it should be. The Fed has a target of 2 percent inflation on the PCE price index. It's actually running at around 3. That's not good conditions for a rate cut. The economy doesn't need a rate cut, at least it doesn't appear to right now. We're not in a recession. So technocrats at the Federal Reserve will not actually deliver the rate cuts Trump wants unless he's able to exert personal control."

Republican Tillis has previously said that he would not support any of Trump's nominees to be the Fed chair due to the Trump administration's probe into Jerome Powell, which he feels threatens the bank's independence. On Tuesday, he said he likes Warsh as a candidate.

"Let's get rid of this investigation so I can support your confirmation," he said, adding, "If anybody thinks the president can appoint somebody and you unilaterally can control things, you're going to be an unsuccessful chair," he said. "If history is any guide, and you've served under some of the best, so I know you're going to do it right. The problem that I have here is that we had some US attorney with a dream thinking it would be cute to bring Chair Powell under an investigation just a few months before the position was going to be open."

Wharton professor and Allianz Chief Economic Advisor El-Erian told CNBC's "Closing Bell" Monday evening that Warsh will "err on the side of lowering rates earlier."

He added that Warsh "says Fed independence is essential" and that "independence will be protected if the Fed delivers on its dual mandate, particularly inflation." Warsh "draws a very clear line between monetary policy and other responsibilities, stressing that the Fed should stay in its lane."

"I think that statement is very well balanced," El-Erian continued. "Most people will agree with it."

Democrat Warren said at Tuesday's hearing that she has major concerns about Warsh's financial disclosures, repeatedly calling him a "sock puppet" for Trump.

"The Fed has been plagued by deeply disturbing ethics scandals in recent years involving at least six Fed officials," she said. "So it's critical that the next chair have no financial conflicts, and you have more than $100 million in investments that you have refused to disclose to ethics officials and the public."

Warsh said he plans to divest from any potential conflicts of interest before taking the oath as chair.

Chochrane, an economist at the right-leaning Hoover Institution — where Warsh has been a fellow — believes he's the right person for the job.

"A lot of commentary accuses Warsh of becoming Treasury Secretary Bessent's puppet at the Fed, and setting the Fed up to finance deficits without complaint, "Chochrane wrote in a February blog post. "I think this is exactly the opposite of what is likely to transpire. Warsh has spent over a decade saying that the Fed needs to buy less government bonds, shrink its footprint on markets, let long-term interest rate go where they want to go, and do less overall."

The economist and University of Michigan professor posted on X Tuesday morning, "Kevin Warsh just lost me."

Wolfers was reacting to a line of questioning during the confirmation hearing from Senator Warren. She asked about Warsh's ethics, financial disclosures, and commitment to central bank independence.

"He argues he's going to be an independent Fed Chair, but refuses to acknowledge that Trump lost the 2020 election," Wolfer's posted. "If you can't state simple facts when you're in the political spotlight, you aren't independent. You're a coward."

Sahm, a former Federal Reserve and White House economist under the Obama administration, wrote this week that Warsh is towing a challenging line: He "must maintain his support among Republican Senators, avoid rattling financial markets, and convince President Trump to pull the plug on the Department of Justice's criminal investigation of Powell."

She also commented on Warsh's hawkish approach to inflation. He said at Tuesday's hearing that "true inflation" should be assessed based on long-term price changes, not short-term geopolitical supply shocks.

"If inflation is the Fed's choice and forecasting is fraught, as Warsh often claims, shouldn't it be raising rates now to lower inflation?" Sahm wrote.