Former Fed Economist Claudia Sahm Warns Kevin Warsh Could Invite Burns-Nixon Comparisons: 'We Should Not Have to Rely on Anonymous Sourcing'
Former Federal Reserve economist Claudia Sahm criticized reports citing anonymous sources to explain Fed Chair Kevin Warsh‘s policy thinking, saying the public should not have to rely on unnamed officials to understand the central bank’s direction.
Markets Shouldn’t Learn Fed Policy Through Anonymous Sources
Sahm shared a Financial Times report that cited people familiar with Warsh’s thinking to explain how the Fed chair could respond if inflation remains elevated ahead of September’s policy meeting.
“Warsh is the Fed Chair. We should all be familiar with his thinking,” Sahm said in a post on X. “We should not have to rely on anonymous sourcing.”
FT reported that Warsh would be prepared to raise interest rates in September if upcoming inflation data remains hot and markets increasingly price in tighter monetary policy.
The Federal Reserve left its benchmark interest rate unchanged at 3.50% to 3.75% at its July meeting, extending its pause for a fifth consecutive meeting despite three officials dissenting in favor of a 25-basis-point rate increase.
Warns Against a Burns-Nixon Repeat
In a separate post, Sahm said conversations between presidents and Fed chairs are expected but should be disclosed publicly.
“Presidents and Fed Chairs talk. That’s a risk to manage, not a scandal,” she said, adding that former Fed Chair Jerome Powell disclosed his conversations with President Donald Trump.
Undisclosed contacts “sound the alarm and invite the Burns-Nixon parallel,” Sahm said, referencing former Fed Chair Arthur Burns, whose relationship with President Richard Nixon has long been cited as a cautionary example of political influence over monetary policy.
Burns eased policy ahead of Nixon’s 1972 re-election, and inflation later accelerated.
“This is not about the Fed, it’s about all of us,” Sahm added.
Warsh’s Communication Strategy Remains Under Scrutiny
Warsh’s communication strategy has come under growing scrutiny since his first Federal Reserve meeting as chair in June.
JPMorgan economists said the Fed chair’s limited forward guidance and questions over the central bank’s inflation framework unsettled bond markets, prompting the bank to move forward its forecast for the next rate hike to December while acknowledging a September increase remains possible.
Last month, economist Peter Schiff also criticized the gap between Warsh’s rhetoric and policy, saying that “for all of Warsh’s tough talk” about returning inflation to the Fed’s 2% target, it remained “business as usual” on both interest rates and the central bank’s balance sheet.
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