WASHINGTON D.C.: Federal Reserve chair nominee Kevin Warsh signaled sweeping changes to U.S. monetary policy on April 21, calling for a fundamental overhaul of how the central bank tackles inflation and communicates with markets, as he faced a tense Senate confirmation hearing.

Warsh told lawmakers the Fed must rethink its approach after what he described as years of policy missteps following the COVID-19 pandemic, which he said continue to weigh on American households.

"The fatal policy errors going back four or five years" are a legacy that families are still working through, Warsh said, arguing the Fed needed "a regime change in the conduct of policy. It means a new and different inflation framework."

His remarks pointed to a broader reset that could include changes to how the central bank signals its outlook, including its current practice of publishing quarterly projections on interest rates and economic conditions.

That communication strategy, Warsh said, had "compounded" the problem, suggesting he may seek to scale back or reshape how the Fed guides market expectations.

The hearing quickly turned contentious, with lawmakers probing both his policy views and political independence.

Warsh declined to directly acknowledge that President Donald Trump lost the 2020 election, a point Democratic Senator Elizabeth Warren said was a test of his independence from the president who nominated him.

He also said he would proceed with plans to divest more than US$100 million in assets, but did not specify which holdings they are or to whom they would be sold, stating that the proceeds would be placed in "plain vanilla" investments.

Warsh was further pressed on Trump's repeated calls for aggressive rate cuts. "Presidents tend to be for cutting rates," Warsh said. "President Trump expresses it quite publicly."

"Monetary policy independence is essential," Warsh had said in a written statement to the committee, which will decide whether to advance his nomination for a seat on the Fed's Board of Governors and a four-year term as chair.

"I do not believe the operational independence of monetary policy is particularly threatened when elected officials - presidents, senators, or members of the House (of Representatives) - state their views on interest rates," he said. "Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish. Inflation is a choice, and the Fed must take responsibility for it. Low inflation is the Fed's plot armor."

Warsh has argued that interest rates could be lowered as advances in artificial intelligence boost productivity, though other policymakers caution that such effects may take time and do not necessarily justify near-term cuts.

The Fed has struggled to bring inflation back to its two percent target for more than five years. While the pandemic initially drove price pressures, more recent factors include tariffs imposed by the Trump administration and rising oil prices linked to the war in the Middle East.

Uncertainty also surrounds the timing of Warsh's confirmation.

President Trump has frequently clashed with current Fed Chair Jerome Powell, whose term ends on May 15. However, Powell could remain in place if the Senate delays action on Warsh's nomination.

Republican Senator Thom Tillis said Warsh's confirmation would be held up until the U.S. Justice Department drops an investigation into Powell that he described as politically motivated.

The situation has created an unusual standoff for the central bank, where leadership transitions are typically smooth.

If no successor is confirmed, the Fed could appoint a temporary chair from among its existing governors. Powell's term as a Fed governor runs until 2028, meaning he could remain influential even after stepping down as chair.

Trump has also suggested he could attempt to remove Powell if he does not resign from the board, a move that would likely trigger a legal battle.

Warsh, who served as a Fed governor from 2006 to 2011, has been sharply critical of the central bank's recent direction and used the hearing to outline his vision for change.

"The Fed must stay in its lane," he said, echoing conservative concerns that the central bank has strayed into areas such as climate policy and economic inequality.

While Republican lawmakers have largely backed his nomination, Democrats have raised concerns about his role during the 2007–2009 financial crisis and the lack of detail in his financial disclosures, setting the stage for a potentially prolonged confirmation process.