It was a constant question: Will be new? Fed Chairman Kevin Warsh is acting more like his true selfaggressive self, or will he accommodate President Donald Trump’s views that a rate cut is what the country needs now? He has been combative in the past –He resigned as Fed governor in 2011 about buying bonds – just as he was getting into more Cautious view of AI and the possible economic sustainability of lower rates.
For Esther George, the former president of the Kansas City Fed and one of the most reliably hawkish voices to ever sit on the Federal Open Market Committee, Americans making long-term financial decisions should stop expecting relief in borrowing costs and instead prepare for them to rise.
“If I were someone planning with that kind of horizon, I would expect interest rates to be higher,” George said Assets.
Warsh was confirmed by the Senate in a 54-45 vote in May and takes over from Jerome Powell at a difficult moment for monetary policy. His first FOMC meeting concluded on June 17 with a unanimous vote to keep the federal funds rate at 3.5% to 3.75% because the consumer price index for May showed an annual inflation rate of 4.2% (prices have already been above the Fed’s 2% target for more than five years).
Nine of the 18 FOMC members forecast a rate hike before the end of the year in their dot plot filings. In the meantime, Bank of America is now forecasting three quarter-point interest rate hikes this yearwhich raises the key interest rate to 4.25%-4.5%.
When George was asked directly if she would cut rates, she replied almost as quickly as Warsh’s predictions came true: “No, I wouldn’t.”
“Inflation is a problem right now, and it has been going on in the United States for some time,” she said. “The real decisions they’re looking at are: Can we hold inflation and see it fall? Do we need to raise rates? And I think there’s probably a good chance that you’re going to have to get serious about raising rates, not cutting rates.”
She argued that the resilience of the economy only reinforces these arguments. Three rate cuts at the end of 2025 eased financial conditions, and George questioned whether they were even justified. “The question is, should the committee roll these back? Is the economy at a level that will really drive them to a higher interest rate?”
With tariffs, a rise in energy prices related to the Iran conflict and immigration policy weighing on household budgets, there are limits to what monetary policy can do, George said.
“The Fed can only do the job it was given. The job it can do is keep inflation low using its interest rate tool. It can’t fix the affordability crisis, it can’t offset tariffs, it can’t change the path of immigration when there are supply issues around the workforce.”
She said that was something Warsh embraced. “It focuses on where we have influence and where we, like the rest of us, sit and watch how it will unfold.”
George supported Warsh despite the political turmoil surrounding his confirmation. “I worked with Kevin Warsh when he was previously at the Fed, so I’m excited to have him come back,” she said. “He has experience, I think he’s a good candidate for leadership.”
On the question of Fed independence – central to the concern Warsh’s confirmationGiven pressure from Trump on the central bank to cut interest rates, George said she expects Warsh to stand firm. “He is not there to do the president’s job. The central bank must be independent in its decision-making if it is to serve the public interest and its mandate from Congress.”
But not everyone shares her confidence. Former Fed economist Claudia Sahm warned that Warsh’s plans to overhaul Fed communications – including his skepticism of forward guidance and the dot plot – risk undoing two decades of hard-won transparency. And Wall Street has been watching closely for signs of whether Warsh will prove to be a consensus builder or an ideologue in the committee.
George joined the Kansas City Fed in 1982 and served as its President and CEO from 2011 to January 2023. He sat on the FOMC for more than a decade and became known for his stubbornness Advocacy for tighter monetary policy. George earned her reputation the hard way: she refused to do so during her tenure on the FOMC I have pursued tighter policy more than any other Fed official of their time and repeatedly called for interest rate increases before their colleagues were willing to take action.
Warsh previously served on the Fed Board of Governors from 2006 to 2011 – coinciding with George’s rise through the ranks at the Kansas City Fed – before moving to the private sector. She said she is watching closely to see how his reform agenda translates into actual policy. “He’s laid out a game plan for this year of things he wants to look at,” she said.
“It’s all fair game, I guess. We’ll wait and see how big the change will be.”