‘I almost fell out of my chair’: Fed stalwart Claudia Sahm fears Kevin Warsh’s policies could undo 20 years of policy progress

Claudia Sahm is one of the Federal Reserve’s most notable alumni: She is the founder of a recession indicator named after her, which has accurately predicted the majority of economic contractions in recent memory. Sahm has concerns about the ultimate direction of the Fed: Warsh’s testimony in front of the Senate Banking Committee left her with more questions than answers, she tells Fortune, and his responses (albeit often without time for explanation) raised the hackles of an economist who worked for the Fed for more than a decade. “I felt like I was more confused about him after the [Senate Banking] hearing than before the hearing,” Sahm tells Fortune in an exclusive interview. “He didn’t give clear, sharp answers, and part of that was trying to navigate the politics of the hearing, but the reality is he’s going to be Fed chairman.” Concerns relating to Warsh come with a caveat: They are situated in the context of politics at this moment. Alarm is relatively high after President Donald Trump has persistently sought to influence the path of monetary policy, launching unprecedented attacks on the Fed and its personnel in the process. The Oval Office has threatened to fire current Chairman Jerome Powell; a legal case has been brought against him, and another has been brought against Board Governor Lisa Cook. Pile on top of this the sharp and public criticism—Trump has called Powell a numbskull, stubborn, and stupid—and any nominee to replace Powell would seem like a shoo-in. Nonetheless, the contents of Warsh’s testimony still raised eyebrows in some quarters—namely, his views on forward guidance. What baffled Sahm the most was the definiteness of his statement: “I don’t believe in forward guidance.” “I almost fell out of my chair,” Sahm said. “Over the past 20 years, the Federal Reserve has moved to much more transparent communication … it does have a tool aspect, but also