After years of hostility toward the Federal Reserve, President Donald Trump has lately taken a new tack. He treats Chairman Kevin Warsh as almost a member of the Cabinet.

There is nothing in U.S. law that requires the Fed chairman to hang up if the president calls, and it is arguably beneficial for the nation’s two most influential economic policymakers to understand where each is coming from.

But Trump’s embrace of Warsh comes with risks for the economy. Fed independence isn’t some abstract moral norm. It exists to protect politicians from their instincts to run the economy too hot and to give central bankers reason to be deliberate in how they exercise their tremendous power over the economy. 

Trump has “spoken repeatedly” with Warsh since Warsh’s confirmation as Fed chairman, The Wall Street Journal reported Wednesday. That marks a sharp change from the president’s relationship with Warsh’s predecessor Jerome Powell, whom Trump appointed and then soured on. Calendars published by the Fed show only one direct meeting between Trump and Powell during the president’s second term through Warsh’s swearing-in on May 22 — in addition to a messy episode when Powell and Trump toured a Fed construction site together.

The White House doesn’t deny Trump and Warsh have spoken.

“President Trump has repeatedly stressed that he is giving Chairman Warsh the space he needs to restore confidence and competence in Fed decision-making,” White House spokesman Kush Desai said in a statement. Trump respects Warsh’s independence, Desai said.

Trump took legal steps to undermine the Fed’s independence under Powell. And yet the president seems to have turned over a new leaf with Warsh’s arrival. Trump hasn’t dropped his demands that the Fed cut interest rates, but he has said repeatedly that he trusts Warsh.

The difference isn’t policy but personnel. Trump was convinced that Powell was out to get him and was making interest-rate decisions to spite the president. Warsh can make the same decision — he hasn’t changed the interest rates he inherited from Powell — and get a different result from Trump.

Warsh has other allies in the Trump administration. Treasury Secretary Scott Bessent sharply criticized a Wall Street Journal reporter’s coverage of the Fed in an X post Wednesday before the paper’s story on the Trump-Warsh relationship ran. A Treasury spokeswoman didn’t respond to questions about the post, but the upshot was clear. Here was the administration defending someone it sees as an ally against the hostile press.

The Fed declined to comment about the report that Trump has been calling Warsh. The chairman has said he’s secure in his relationship with the president. He told the Senate last month he’s willing to hear just about anyone with a point of view. “I certainly don’t feel uncomfortable receiving a call from the chairman of this committee or the president of the United States,” Warsh said. He will make his own decisions about interest rates.

A White House official said Thursday he wasn’t party to the president’s calls but believes the president is merely using Warsh as a sounding board, just like he does with other prominent people whose opinions he trusts. CNBC agreed to allow the official to speak anonymously to describe the president’s thinking candidly. If Trump was pressuring Warsh to lower rates now, the world would know it, the official said. Trump would shout it from the rooftops, as he did with Powell. That hasn’t happened.

But that doesn’t mean Warsh can rest easy about Trump’s decision to treat him as a kind of shadow Cabinet official.

Market commentators panned the chairman’s performance at his second press conference last week. Warsh came out trying to give investors the impression he was on the edge of raising interest rates to fight inflation that has stayed above the Fed’s 2% annual target for more than five years. But the chairman’s answers to reporters’ questions cast doubt on the more hawkish comments in his prepared remarks.

Investors sold off long-term-government debt as a hedge against the possibility that Warsh might not follow through on his pledge to take swift action against inflation.

The narrative that emerged was that Warsh had lost credibility. It isn’t clear that’s really the case. Market measures of inflation expectations, such as five-year inflation swaps, have fallen modestly since the Fed press conference, though they remain above 2%, according to LSEG data on Thursday afternoon. If inflation continues to ease, Warsh can keep rates on hold this year.

But should inflation spike and expectations rise, Trump will have put Warsh in a difficult position. He would need to demonstrate that he is willing to act. And that wouldn’t come cheap, said Timothy Geithner, a former New York Fed president and treasury secretary under President Barack Obama.

“The risk is for the economy is that he’ll have to do more than otherwise would be necessary to earn that credibility,” Geithner said of Warsh on CNBC Tuesday. Higher interest rates tend to slow the economy. Slowing the economy to prove a political point is the last thing a Fed chair should do. 

It would also be self-defeating for Trump, who won the presidency again in 2024 after inflation crippled President Joe Biden’s administration. 

A congressman pointed out the irony to Warsh at a hearing last month. “Had your predecessor caved to Trump, and lowered interest rates below what economics would call for, we would have much higher inflation today,” Rep. Brad Sherman, D-Calif., told Warsh. Republicans’ would have taken a political hit, he said. “Your agency has saved Donald Trump from himself,” Sherman said.

Warsh didn’t reply, but for a moment, he cracked a smile.