Trump Derails GOP Plans for His Intelligence Nominee

Fed Chair Kevin Warsh (Reuters)
By Yuval Rosenberg and Michael Rainey

Good Wednesday evening! New Federal Reserve Chairman Kevin Warsh laid out more of his vision for reforms at the bank today after leading his first policy meeting, which ended with a vote to hold interest rates steady for a fourth straight meeting. Here's what you should know.

Warsh Ushers In 'Regime Change' as Fed Holds Steady on Rates

In its first meeting under new Federal Reserve Chair Kevin Warsh, the Federal Open Market Committee held its benchmark rate steady, reflecting growing concerns about inflation among bank officials.

All 12 voting members of the committee agreed to hold rates steady in a range of 3.5% to 3.75%, the first time in a year there was no dissent.

About half of the officials at the two-day meeting forecast at least one interest rate increase this year. A notably brief post-meeting statement released by the Fed eliminated a section found in previous statements that reflected a bias toward cutting rates in the future, further highlighting the hawkish concern about elevated inflation. (For an analysis of the large amount of text cut from previous Fed statements, see this New York Times graphic.)

Speaking to reporters at his first press conference as chair, Warsh vowed to deliver price stability. "Persistently high prices are a burden for the American people, but the recent past need not be prologue," Warsh said. "The commitment to deliver is strong, unanimous and unambiguous."

Still, it may take some time to bring inflation down to the Fed's 2% target rate. Projections from Fed officials show inflation not falling back to that level until 2028.

Warsh plans updates: The new Fed chief has promised "regime change," and on Wednesday he announced the creation of new internal committees that will review the way the central bank operates. The committees will focus on five areas: communications, the bank's balance sheet, data sources, productivity and jobs, and the central bank's "inflation frameworks."

Warsh may have delivered the first part of his regime change in the Fed post-meeting statement, which did not include any information about the likely course of monetary policy. "We've dropped forward guidance," Warsh said. Some Fed officials "think as a general proposition forward guidance isn't the business we should be in."

Warsh also repeated his long-held belief that inflation is a direct product of central bank policy. "I've said for years inflation is a choice," he said.

At the same time, Warsh rejected the idea that the Fed's dual mandate to provide price stability and maximum employment contains a deep tension in which one goal sometimes conflicts with the other.

"I don't believe that we have a cruel choice," Warsh said. "I don't share the view that was expressed a few generations ago that Federal Reserve chairmen show up at a podium and say you've got to choose. And you're going to have to decide whether you're willing to tolerate higher inflation to put more people at work. I don't believe in that. What I believe is if we do our job, we can make strong growth, low prices and strong employment mutually compatible."

Warsh then repeated his vow to stabilize prices, making it clear that is his primary concern.

What analysts are saying: Stocks tumbled and interest rates rose Wednesday as investors reacted to a Fed that has grown more hawkish on inflation.

"The big news is that nine FOMC members believe it would be appropriate to tighten policy before the end of this year," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, in a note to clients. "We expected only three members to anticipate hiking."

Tombs added that recent inflation data, which showed prices continuing to rise, was likely "the final straw for some members," pushing them to take a more hawkish stance.

Tombs also highlighted the fact that, unlike all the other Fed officials, Warsh did not provide his own interest rate forecast. "This was a good move politically," he wrote. "Mr. Warsh would have attracted criticism for being the President's stooge and unable to influence the rest of the Committee if he alone had forecast a rate cut, while forecasting no change in policy would immediately have incurred the wrath of the White House."

Krishna Guha, head of central bank strategy at Evercore ISI, noted that before he was nominated by President Trump, Warsh was known as an inflation hawk - quite different from Trump, who has long called for lower interest rates, regardless of inflation. "New Fed Chair Warsh sounded a bit like old hawkish Fed governor Warsh at his press conference today repeating multiple times the need for the Fed to deliver on its mandate for price stability," Guha said, per CNBC.

The bottom line: Fed officials are increasingly concerned about inflation but are holding rates steady for now under their new leader as they wait to see how the economy evolves before their next meeting at the end of July.

Trump Derails GOP Confirmation Plans for His Own Intelligence Nominee

President Trump today blew up the Senate's plans to quickly take up the nomination of Jay Clayton to serve as director of national intelligence.

The Senate was speeding ahead on that nomination to avoid having Bill Pulte, the MAGA loyalist Trump had picked to serve as acting intelligence chief, step into that role. Democrats and some Republicans said that Pulte, the head of the Federal Housing Finance Agency, was completely unqualified given his total lack of national security experience. Democrats insisted that Trump and Republicans needed to dump Pulte before they would help reauthorize a lapsed surveillance tool, section 702 of the Foreign Intelligence Surveillance Act.

Trump derailed that compromise, announcing on social media that he had called off a Senate Intelligence Committee confirmation hearing for Clayton scheduled for this afternoon. Trump said that Pulte would be acting director - and he insisted that he will not approve the FISA renewal without the election reform bill that has stalled in the Senate. Trump also demanded that the Senate first confirm Jamie McDonald, his pick to succeed Clayton as U.S. attorney for the Southern District of New York.

Sen. Tom Cotton, the Republican chair of the Intelligence Committee, said in a post on X that the president had instructed Clayton not to appear at a confirmation hearing scheduled for this afternoon. Cotton called the move "regrettable."

Sen. Mark Warner, the Democratic vice chairman of the Intelligence Committee, slammed Trump's move. "What we're witnessing is an extraordinary display of dysfunction from a president who seems determined to turn America's national security into a political bargaining chip," Warner said in a statement. "National security cannot be governed by social media post. The president's latest intervention only underscores a simple reality: the biggest obstacle to resolving these issues has not been Senate Democrats or Senate Republicans. It has been the chaos and confusion coming from the White House itself."

When asked why Trump was linking his push for voter ID to his intelligence nominee, Senate Majority Leader John Thune reportedly answered: "Good question."

Number of the Day: $2.6 Billion

The Trump administration announced a deal Wednesday to pay $765 million to buy back offshore wind leases for four projects off the coasts of New Jersey, central California and Maine.

The announcement continues an administration push to kill off wind energy projects, which President Trump opposes, in favor of fossil fuel projects. The latest agreement raises the total spent by the administration on such deals to nearly $2.6 billion, according to the Associated Press.

The Interior Department said the money involved in the settlement would be redirected "towards other domestic energy sources with the demonstrated capability to deliver reliable, affordable power, including the development of natural gas-fired power plants in Indiana, Wisconsin, Iowa, Kansas, and Missouri and geothermal power generation projects in the Western U.S."

Interior Secretary Doug Burgum said the deals represent a commonsense shift. "The offshore wind leases were sold under the assumptions that taxpayers would indefinitely subsidize costly, unreliable projects and that no national security concerns were implicated - both assumptions have since been proven false," Burgum said in a statement.

Advocates for offshore wind and other green energy projects have criticized the Trump administration's buyouts and have noted that the fossil fuel projects in this case won't replace the power that would have been supplied in the Northeast.

"The central question Americans need to ask is whether we have enough raw power - and a sufficiently diverse range of resources - to supply our economy going forward," Hillary Bright, the executive director of offshore wind advocacy group Turn Forward, said in a statement in March, after an earlier administration deal was announced. "The conflict in Iran underlines the importance of having different energy options at your disposal when unexpected events occur. Offshore wind is showing its effectiveness in the U.S. every day and presents a near-term, cost-effective solution to help power the East coast. Eliminating this option hurts our ability to fuel our economy long term."

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