Trump says he'll let Warsh 'do what he wants to do' with interest rates. It's a remark that Fed watchers have been bracing for.

By Victor Reklaitis and Greg Robb

The president's remark comes in the wake of his long and unprecedented pressure campaign on the U.S. central bank

Kevin Warsh, President Donald Trump's nominee for chair of the Federal Reserve, departs following a Senate Banking Committee hearing last month in Washington, D.C.

President Donald Trump on Tuesday shifted his message for the Federal Reserve, suggesting he would give some slack to incoming Fed Chair Kevin Warsh after putting unprecedented pressure on the U.S. central bank for more than a year.

Trump's change came in an interview with the Washington Examiner, in response to a question about whether Warsh would cut interest rates, even as markets are viewing a hike as more likely.

"I'm going to let him do what he wants to do," Trump said. "He's a very talented guy, he's going to be fine, he's going to do a good job."

Trump has been hammering departing Fed Chair Jerome Powell for months because the central bank has not been lowering rates as swiftly as he would like.

Economists have been saying that Warsh - who is slated to get sworn in as Fed chief on Friday at the White House - could be in for a rough start at his new job. There has been considerable anticipation around whether Warsh can chart a policy course that differs from the president's wishes ahead of crucial midterm elections in November.

See: 5 tests Kevin Warsh will face as Fed chair

Trump's latest remark looks like an acknowledgement that Warsh will be just one of 12 voters on the Fed's rate-setting committee, known as the Federal Open Market Committee or FOMC.

"It does seem like Trump is aware of how the FOMC works, and Trump may not get his way, certainly not at the beginning," said Derek Tang, an economist at Monetary Policy Analytics.

"It sounds like the White House is giving itself an offramp in advance, because we're not going to get a rate cut in June. This creates breathing room for Warsh to find his footing in his first few months as chair."

The White House's patience with Warsh could run out as November's midterm elections get closer, Tang added. Voters' feelings about the economy need to improve by September in order for Republicans to replicate their wins in 2024, he told MarketWatch.

Pressure to hike rates is building in financial markets. Traders in derivative markets see a 60% likelihood that the Fed will raise rates by December.

-Victor Reklaitis -Greg Robb

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-19-26 1618ET