Future of the Fed: Chairman Warsh Meets Congress

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July 21, 2026

Economy

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This article summarizes two congressional hearings. The views expressed by participants do not necessarily reflect those of Across the Aisle™ or its programs, including Free the Facts™ and Answer the Call™.

Newly-confirmed Federal Reserve Chair Kevin Warsh made his first appearance in Congress last week, testifying before the House Financial Services Committee on July 14 and the Senate Banking, Housing, and Urban Affairs Committee on July 15.

The hearings came just days after the Federal Reserve released its latest Monetary Policy Report and immediately after new June inflation data showed price pressures easing. According to the Consumer Price Index (CPI), inflation is moving closer to the Federal Reserve's 2 percent target, while the labor market has remained relatively steady. Housing, however, continues to lag as elevated mortgage rates weigh on home sales and construction.

So, what is the Federal Reserve?

The Federal Reserve, often called “the Fed,” is the central bank of the United States. It helps manage the economy, with the goals of keeping prices stable and supporting a strong job market. As the Chair, Kevin Warsh helps guide the Fed's decisions and serves as its primary public representative.

What they discussed.

Although the hearings were officially about the Federal Reserve’s outlook for the economy and monetary policy, much of the discussion centered on Warsh's leadership of the central bank and the direction he plans to take the institution.

Republican lawmakers generally focused on Warsh's plans to reform the Federal Reserve and refocus it on its core responsibilities of supporting a strong job market and keeping inflation low. Senate Banking Committee Chairman Tim Scott (R-SC) emphasized the importance of ensuring the Fed remains focused on its statutory mission. Members also asked about the agency's internal operations, communication strategy, and what some described as "mission creep" under previous leadership. House Financial Services Committee Chairman French Hill (R-AR) welcomed Warsh's review of the institution, stating that "reform is the mechanism by which the Fed can become the best version of itself for the American people."

Democratic lawmakers largely focused on safeguarding the Federal Reserve's independence from political pressure. Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) and House Financial Services Committee Ranking Member Maxine Waters (D-CA) both emphasized the importance of maintaining an independent central bank that makes monetary policy decisions based on economic conditions rather than political considerations. They argued that preserving the Fed's independence is critical to maintaining its credibility and ensuring it can carry out its primary functions.

Throughout both hearings, Warsh repeatedly emphasized two priorities: maintaining the Federal Reserve's independence and improving how the institution carries out its responsibilities. On independence, Warsh stressed that monetary policy decisions would be guided by economic data and the law rather than outside political pressure. He reiterated that the Fed's primary responsibility is restoring price stability, telling lawmakers that Fed policymakers have "no tolerance for persistently elevated inflation" and are "resolute[ly] commit[ted] to restoring price stability." He also argued that "if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past."

Warsh also spent considerable time discussing his plans to reform and modernize the Federal Reserve. He highlighted five new task forces that will review key aspects of the institution's work before making recommendations later this year. The task forces will examine:

Communication
Balance Sheet Policy
Data
Productivity and Jobs
Inflation Frameworks

Artificial intelligence emerged as another major topic during both hearings. Lawmakers from both parties questioned how AI could affect inflation, employment, and economic growth over the coming years.

Warsh acknowledged that AI could create short-term price pressures, but he argued that investment could ultimately expand the economy's productive capacity and support stronger long-term growth. More broadly, Warsh described artificial intelligence as "the greatest economic transformation of [his] lifetime" and said understanding its effects will be a major focus of the Federal Reserve.

What this means for you and me.

The Federal Reserve plays a central role in keeping the economy stable by setting interest rates and influencing the amount of money in circulation. The Fed can speed up or slow down the economy by adjusting these key levers.

With Kevin Warsh in the driver’s seat, his decisions will impact borrowing costs for every American, including the amount they pay for a home, a car, or to start a business.

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The federal budget is the itemized plan for public expenditures of the federal government. This includes mandatory and discretionary spending. The budget is compiled annually and is named after the proceeding fiscal year, which runs from Oct. 1 to Sept. 30. If a budget is not agreed upon by the start of the fiscal year, a government shutdown will be triggered unless Congress passes a continuing resoultion, which provides funding at existing levels for a period of time to allow for negotiations to continue.

Federal Budget

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Debt-to-GDP Ratio

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National Debt

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Budget Deficit

GDP is the total monetary value of consumer goods and services within a country's economy. This calculation considers consumer spending, government spending, private domestic investment, and a country's imports and exports.

Gross Domestic Product (GDP)

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Tax Revenue

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Appropriations Bills

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Budget Authorizations

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Budget Resolution

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Budget Request

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Discretionary Spending

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Mandatory Spending

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Coinsurance

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Long-term Disabilities

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Taxable Maximum

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Spousal Benefit

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Special Issue Securities

In the context of Social Security, the "replacement rate" or "replacement ratio" is the percent of pre-retirement earnings that Social Security recipients can expect to receive. Median-income retirees typically expect around a mid-thirty percent replacement rate, low-income retirees get closer to fifty percent, and high-income retirees typically receive a mid-twenty percent replacement rate.

Replacement Rate

Every covered worker pays a payroll tax that includes a combined 12.4% up to the taxable maximum.

Payroll Tax

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PIA

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OASI

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OASDI

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Full Retirement Age

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Employer Contribution

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Employee Contribution

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DI

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Beneficiary

Stands for average indexed monthly earnings. When a worker retires, the Social Security Administration summarizes up to 35 years of the worker's lifetime earnings and adjusts them for wage inflation. This number is then used to calculate the retiree's "PIA" or primary insurance amount.

AIME