Warsh Tasked To Make Fed Sterling Again

When Kevin Warsh is sworn in as chairman of the Federal Reserve this Friday, he will inherit more than an interest-rate debate. He will inherit a central bank weakened by missed inflation forecasts, the ongoing mistake of calling it “transitory,” new AI-driven supervisory risks, tariff misjudgments, global imbalances, and growing public distrust. Restoring the Fed’s sterling reputation will require more than new rhetoric.

Moreover, the Fed’s credibility will depend not on greater insulation from criticism or politics, but on clearer judgment, constitutional accountability, intellectual humility, and a willingness to confront the problems that economists and central bankers have routinely dismissed until it was “too late.” In concrete terms, that means Warsh should impose a regular forecast audit, make the Fed more candid about what it knows and does not know, build stronger AI and cyber-supervisory capacity, update economists’ outdated assumptions about tariffs, stay within the central bank’s statutory lane, and respect the constitutional limits of Fed independence.

A central banker should have a sterling reputation, but this phrase requires some explanation. “Sterling” was not meant, first and foremost, as a compliment. It was simply a metallurgical and monetary standard. Sterling is the standard of purity for silver: an alloy of at least 92.5 percent silver, the old English coinage standard of 925 parts silver and 75 parts copper. The name may come from Easterling coiners brought to 12^th century England under Henry II to improve the coinage, or more plausibly from the Old English “steorling,” a “coin with a star.” Either way, the point is the same. Sterling was not meant to burnish a reputation through inheritance or even by proclamation; it was reputation granted thorough testing, discerning, and refining. It meant the coin had weight, purity, and discipline enough to survive inspection.

That is the standard Kevin Warsh should bring to the Federal Reserve: namely the hard test of sound money, plain speech, and constitutional accountability.