One of the leading contenders to serve as President-elect Trump’s Treasury secretary said that diversity, equity and inclusion (DEI) and similar policies are a distraction for the Federal Reserve from its primary mission – promoting maximum employment and price stability.
Kevin Warsh, a former member of the Federal Reserve’s Board of Governors, was asked in a recent interview on FOX Business Network’s “Kudlow” about whether efforts by the White House and Senate Democrats to influence the Fed to focus on advancing DEI and combating racial injustice through monetary policy.
“I’m afraid I have to say yes,” Warsh responded. “It bothers me, the Fed’s an important institution, the institution doesn’t need to be like this. It might be a coincidence, but over the last several years, as they’ve wandered into these areas which are fads, which are trends, that’s when we see inflation spike.”
Warsh also said that central bankers should be “wary” of “resisting” fads.
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“We’re not in the political business, and when we look like we’re playing a little bit of politics, we end up with irresponsible monetary policy, irresponsible fiscal policy,” Warsh said. “Even if their intentions are great to help those with certain gender and group identities, the best way is to help Americans as individuals and that’s to have stable prices. Prices have not been stable, prices stopped falling about five or six months ago,” he said. “Inflation today, by their preferred measure of core PCE, is closer to 3% than 2%. It might be OK for asset holders, it might be OK for the stock market – deeply destructive to the middle class.”
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Larry Kudlow asked Warsh if the Fed is “guilty of being infected by DEI,” similar to how colleges and universities and corporations have adopted the policies.
“I’m afraid to say there has been some mission creep, that mission creep has been going on for a long time,” Warsh said. “I want to say it comes from the best of intentions, I want to say it’s because the central bank thinks they can solve every other problem in Washington. But even if that’s their intention, it hasn’t worked.”
“They have taken some powers away from the fiscal authority – Congress is the one who should be appropriating money, deciding these things. Instead, the Fed is entering their business as if they’re the philosopher kings in Washington.”
“The good news is we have an independent central bank. The bad news is we need to keep them clearly focused on their remit and the results of the last few years suggest they haven’t,” he said.
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