How Kevin Warsh Intends to Approach Monetary Policy: Critique by RSM's Chief Economist

Joseph Brusuelas, chief economist at RSM, published a detailed analysis on January 30th regarding Kevin Warsh’s approach to monetary policy. The assessment is based on public statements, speeches, and Warsh’s actual performance during his tenure at the Federal Reserve. According to the report circulated by Jin10, the economist’s conclusions reveal a critical perspective on how he tends to handle major economic issues.

Consistent Preference for Raising Interest Rates

The analysis shows that Warsh’s initial reaction to monetary policy issues tends to be aggressive. He demonstrates a persistent inclination to prioritize raising interest rates as a response tool to economic disruptions. This approach reflects a relatively rigid stance on inflation control, even in economic contexts that would require flexibility.

Inadequate Management of Responses During the 2007-2008 Crisis

Brusuelas has expressed significant criticism of how Warsh managed monetary policies in the period following the devastating 2007-2008 financial crisis. According to economists, Warsh failed to fully understand the complex nature of the economic shock unfolding, its true magnitude, and the profound impact it was having on the American economic system. This crisis had significant similarities to the Great Depression, which should have triggered a fundamental recalibration of policy strategy.

Incorrect Focus on Inflation During the Deflationary Shock

One of the most serious errors identified by Brusuelas is that, during 2007-2008, Warsh continued to treat inflation as the primary economic risk, ignoring the reality of a massive deflationary shock already triggered in financial markets. This misguided prioritization of monetary policy had severe consequences: it nearly led to the collapse of the American banking system and caused a critical freeze in credit markets, exacerbating and prolonging the recession’s effects. The analysis highlights how a mistaken perception of economic dynamics can lead to counterproductive policy responses in critical moments of crisis.