Kevin Warsh made his case for becoming chairman of the Federal Reserve at a hearing before the Senate Banking Committee on Tuesday. A change in Fed leadership could have far-reaching consequences for consumers’ borrowing costs, experts say.
The Fed chair nominee — and President Donald Trump’s pick to replace current Chair Jerome Powell — spoke to Senators about his approach to rate setting as a preferred lever for fighting inflation.
Among the various methods at the central bank’s disposal to promote maximum employment and keep prices stable, “the Fed has an interest rate tool and a balance sheet tool,” Warsh said at the hearing on Tuesday. “My view is, the interest rate tool gets in the cracks, it’s fairer.”
The Fed sets the interest rate, called the Fed funds rate, that banks charge each other for overnight lending. That rate then affects many consumer borrowing and savings rates.
Generally, short-term rates, such as credit card rates, are closely pegged to the Fed’s benchmark. Longer-term rates, such as mortgage rates, are more influenced by inflation and other economic factors.
