Original title: "Wosh emphasizes the independence of the Federal Reserve during the hearing, stating he will never be Trump’s 'puppet' and has never been asked to make a commitment to cut interest rates."

Original author: Li Dan

Original source: Wall Street Insights

On the evening of the 21st, Eastern Time Tuesday, the U.S. Senate Banking Committee held a hearing concerning the nomination of the Federal Reserve Chair. Facing questioning from bipartisan senators, nominee Wosh emphasized the importance of maintaining the independence of monetary policy, stating that he intends to reform the Federal Reserve in multiple ways and will never act under the orders of U.S. President Trump.

In his prepared opening remarks, Wosh committed to “ensuring that the implementation of monetary policy always maintains strict independence,” while stating that “the independence of the Federal Reserve primarily depends on the Fed itself,” asserting that the Fed should stay true to its role and if it extends its functions into areas of fiscal and social policy for which it lacks statutory authority, “its independence will face the greatest risk.”

Wosh said, “The independence of monetary policy is crucial. I believe that when elected officials—whether the president, senators, or representatives—voice opinions on interest rates, the operational independence of monetary policy is not particularly threatened.”

Given his belief that the Federal Reserve should stick to its functional boundaries, Wosh stated that he is not in a position to comment on Trump’s case to fire Federal Reserve Governor Lisa Cook. The focus of the commentary is on: how much power the president truly has to exert influence over the Federal Reserve, an independent institution.

Nick Timiraos, a journalist known as the "new Federal Reserve correspondent," commented that while outlining his ideas for “reforming” the Federal Reserve during the hearing, Wosh largely upheld the views he has repeatedly emphasized over the past few years—namely, replacing the models the Fed uses to forecast inflation, reducing the frequency of external communication, and gradually shrinking its balance sheet, which currently exceeds $6.7 trillion, over time.

Timiraos believes that whether Wosh’s nomination can be confirmed is less about whether he can gather enough supportive votes and more about who will first make a concession regarding the criminal investigation concerning Fed Chair Powell, Trump or Republican Senator Thom Tillis.

Timiraos noted that there were several notable points during the two-and-a-half-hour hearing:

• Wosh avoided all attempts to distance himself from Trump;
• Wosh pledged to strive to maintain the independence of the Federal Reserve but cleverly dodged the most challenging tests, such as refusing to comment on Trump’s attempt to fire Governor Cook or any stance on the criminal investigation related to Powell's renovation of the Fed headquarters;
• Wosh's rhetoric about independence may not sit well within the Federal Reserve, as his main argument was that the recent difficulties faced by the Fed were entirely of its own making.

Timiraos also mentioned that Wosh did not call for an interest rate cut but did not weaken the case for supporting one either. He advocated that the Federal Reserve should focus on core inflation and referred to measures such as the trimmed mean, which exclude outliers. These measures indicate that the actual inflation level is much closer to the Fed's target of 2%. Wosh also countered the viewpoint held by several current Fed officials that tariffs have inflated recent inflation data. However, he did not declare victory over inflation, rather stating, “The trend of inflation is improving, but there is still more work to be done.”

Wosh states Trump never asked, and he would never agree to commit to cutting interest rates

During the Q&A session of the hearing, when Senator John Kennedy asked Wosh whether he would become Trump’s “puppet,” Wosh replied, “Absolutely not.”

Senator Ruben Gallego cited a report from The Wall Street Journal which stated that Trump had pressured Wosh to cut rates once he was confirmed, indicating that someone was lying, either Trump or Wosh.

Wosh disputed the report, stating that the author needed to “find more reliable sources or follow stricter journalistic standards.” He said, “I take responsibility for every word I say. The president never asked me to make any such commitment, nor would I ever make such a commitment.”

Senator Jack Reed asked Wosh whether he would yield to Trump’s call for an interest rate cut. Trump had stated he would not pick someone for Fed chair who did not support rate cuts. Wosh responded that he had never made any commitments to Trump.

Senator Elizabeth Warren stated that Wosh was “extremely unfit” to be Federal Reserve Chair. She repeatedly asked Wosh whether Trump lost the 2020 election. Wosh refused to answer, saying, “If I am confirmed, we will work to keep political factors out of the Federal Reserve.”

Warren pressed Wosh repeatedly for more details about his assets, valued at about $100 million, asking whether any of those assets were tied to Trump and his family or involved investments related to the convicted Epstein.

Wosh reiterated that he had worked with the Office of Government Ethics (OGE) to divest relevant personal assets. He agreed that upon confirmation of his nomination, he would “sell all my financial assets,” and he never provided any specific asset details.

Hoping for "systemic reform" of the Federal Reserve requires a new communication approach; four meetings a year too few

Wosh previewed that if his nomination is confirmed, he hopes to undertake comprehensive reforms of the Federal Reserve, including “reforming the policy implementation system” and establishing an entirely new “inflation framework.” Wosh believes the Federal Reserve needs a new inflation framework, but he did not disclose what form his envisioned framework would take.

Wosh told Senate Banking Committee Chair and Republican Senator Tim Scott, “We need a new framework, new tools; (Chairman), I would also like to add that we need a new way of communicating.”

Regarding communication, Wosh remarked that he believes there is “over-communication” among Fed officials on interest rates—specifically manifested in the economic forecasts published quarterly. In this forecast, officials are asked to anonymously predict what interest rate levels they believe are appropriate. This includes the so-called dot plot of interest rates.

When later asked how many monetary policy meetings would be held annually if confirmed as Fed Chair, Wosh did not answer directly. He stated that according to the Federal Reserve Act, the minimum is four meetings a year, which is clearly too few. Wosh said, “Four (meetings) is clearly not enough, so it is appropriate to hold more meetings than that.”

As for whether there will continue to be press conferences after monetary policy meetings, Wosh did not give a clear answer, stating, “If there are press conferences, I believe that listening to journalists' current concerns and questions would be an inherent responsibility.” However, he reiterated his previous criticism that Fed officials speak too much.

AI may enhance economic productivity without triggering inflation, creating space for interest rate cuts

Senator Van Hollen expressed concern over Wosh's shifting stance on whether interest rate cuts would be beneficial, saying, “I worry that your position on interest rates seems to sway with political convenience rather than being based on sound economic judgment,” and asked Wosh why he leans toward cutting rates when inflation remains high.

Wosh stated that if potential economic growth picks up pace—such as benefiting from advancements in artificial intelligence (AI), then inflation might not be as concerning, thus creating space for interest rate cuts.

The media noted that while Wosh did not directly mention “productivity” in his response, it is indeed the core of his argument. However, many economists remain skeptical of the argument that AI would help reduce inflation, pointing out that, at least in the short term, AI might actually push inflation further up.

Wosh elaborated on his thoughts on how AI will affect the economy. He pointed out that, on one hand, the huge investments businesses are making in AI infrastructure will raise demand in the short term, subsequently indirectly increasing inflation. On the other hand, in the long run, AI technology itself has the potential to enhance economic productive capacity, thus aiding faster economic growth without triggering inflation.

When asked about AI-related topics, Wosh stated, “We are at the most disruptive moment in the modern economic history of the U.S. and the world.”

Senator John Kennedy expressed serious skepticism. He stated that the various promises of AI leading to significant productivity increases, in his view, are merely “hype” concocted by some to promote upcoming IPOs.

The Federal Reserve must be held accountable for the expansion of America's "K-shaped economy"

During the hearing, Wosh stated that the Federal Reserve is “not blameless” for the increasing wealth inequality—now widely recognized as the “K-shaped economy” phenomenon—and pointed out that the Federal Reserve's large balance sheet has expanded its influence over the economy.

When responding to Senator Raphael Warnock's question, he said, “I believe the Federal Reserve is not blameless for the divergence that has emerged between those who own financial assets and those who do not—after all, the Fed's balance sheet has ballooned from $800 billion when I first joined in 2006 to now being an order of magnitude larger.”

He continued, “If the Federal Reserve had maintained a smaller balance sheet scale at that time... I believe interest rates could have been lower, inflation could have been better, and the economy could have been stronger.”

Wosh declined to specify an appropriate scale for the Fed's balance sheet. However, he stated that the balance sheet should be reduced and that the Federal Reserve should not continue holding long-term Treasury securities.

In February, Xinhua News Agency cited U.S. media reports stating that wealth inequality in American society continues to worsen, with structural fractures widening rapidly, and the characteristics of the “K-shaped economy” becoming increasingly obvious. Xinhua mentioned that data shows that by the third quarter of 2025, the top 1% of the U.S. population will own nearly 32% of the nation’s wealth, a historic high, while the bottom half of the population only holds 2.5% of the national wealth.

Cryptocurrency should be integrated into the financial system

Senator Cynthia Lummis asked Wosh whether he thinks that crypto assets should be integrated into the financial system, so that consumers could enjoy more diverse investment options and better consumer protection.

Wosh answered positively, stating, “Digital assets have already been deeply integrated and have become part of the fabric of our financial industry, so my answer is yes.”

Wosh also mentioned that the Fed does not have the authority to issue digital currency, calling it a bad policy choice. The Federal Reserve indeed should not adopt central bank digital currency (CBDC).

Senator Tillis insists he will not support the nomination until the Justice Department ends the investigation into Powell

During the hearing, key Senator Thom Tillis stated that he would not ask Wosh questions about his views but would take the opportunity to explain why he intends to block this nomination for Fed Chair. Tillis previously pledged to obstruct any nominee until the U.S. Department of Justice withdraws its criminal investigation into Powell.

The Justice Department’s investigation focuses on the billion-dollar renovation of the Federal Reserve's Washington headquarters and Powell's testimony to the Senate Banking Committee regarding this last year. Tillis displayed a series of posters detailing the start and progress of the Fed's renovation project. He pointed out that while the cost overruns are “regrettable,” they seem to be “compliant and proper.”

Tillis told Wosh, “Let’s resolve this (Powell’s) investigation first, then I can turn to support your nomination.”

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