A former Fed colleague of Kevin Warsh on what to expect: ‘Plan for higher rates’

Esther George spent a decade dissenting in favor of tighter policy. Now, she says, Warsh may have no choice but to raise rates.

It’s been a constant question: Will new Fed Chair Kevin Warsh act more like his true, hawkish self, or will he cater to President Donald Trump’s views that a rate cut is what the country needs right now? He’s been hawkish in the past—quitting in 2011 as a Fed governor over its bond buying—just as he’s taken on a more dovish view of AI and the possible economic sustainability of lower rates.

For Esther George, the former Kansas City Fed president and one of the most reliably hawkish voices to ever sit on the rate-setting Federal Open Market Committee, Americans making long-horizon financial decisions should stop expecting relief from borrowing costs, and instead start preparing for them to rise.

“If I were someone planning with that kind of horizon, I’d plan for higher rates coming ahead,” George told Fortune.

Confirmed by the Senate by a 54–45 vote in May, Warsh takes over from Jerome Powell at a difficult moment for monetary policy. His first FOMC meeting concluded June 17 with a unanimous vote to hold the benchmark Federal funds rate steady at 3.5% to 3.75%, as the consumer price index for May showed a 4.2% annual inflation rate (prices have held above the Fed’s 2% target for more than five years already).

Nine of the 18 FOMC members projected a rate hike before year-end in their dot-plot submissions. Meanwhile, Bank of America now forecasts three quarter-point hikes this year, lifting the benchmark rate to 4.25% to 4.5%.

George, when asked directly whether she would cut rates, answered almost as quickly as the predictions for Warsh have come rolling in: “No, I would not.”

“Inflation is a problem right now, and it’s been a problem for a while in the United States,” she said. “The real choices they’re looking at is, can we hold and see inflation fall? Are we going to have to raise rates? And I think there’s probably a good chance that you’ll have to talk seriously about raising rates, not cutting.”

The economy’s resilience, she argued, only reinforces that case. Three rate cuts late in 2025 loosened financial conditions, and George raised the question of whether they were warranted at all: “The question is, should the committee take those back? Is the economy performing at a level that really put it back at a higher interest rate?”

As tariffs, an energy price spike tied to the conflict in Iran, and immigration policy all squeeze household budgets, George said there are limits to what monetary policy can accomplish.

“The Fed can only do the job it was given. The job it can do is keep inflation down by using its interest rate tool. It cannot fix the affordability crisis; it cannot offset tariffs; it can’t change the path of immigration with supply issues around the workforce.”

She said that’s something Warsh has embraced: “He’s focused on where do we have impact? And where do we, like the rest of us, sit there and watch how it’s going to unfold?”

George endorsed Warsh despite the political turbulence surrounding his confirmation. “I worked with Kevin Warsh when he was at the Fed before, and so I welcome him to come back,” she said. “He’s got experience. He’s, I think, a good candidate to lead.”

On the question of Fed independence—central to the anxiety surrounding Warsh’s confirmation, given Trump’s pressure on the central bank to cut rates—George said she expects Warsh to hold firm. “He’s not there to do the president’s work. The central bank has to be independent in its decision-making if it’s going to serve the public’s interest and its mandate from Congress.”

But not everyone shares her confidence. Former Fed economist Claudia Sahm warned that Warsh’s plans to overhaul the Fed’s communications—including his skepticism of forward guidance and the dot plot—risk undoing two decades of hard-won transparency. And Wall Street has been watching closely for signs of whether Warsh will prove a consensus builder or an ideologue on the committee.

George joined the Kansas City Fed in 1982 and served as its president and CEO from 2011 through January 2023, sitting on the FOMC for more than a decade and becoming known for persistent advocacy for tighter monetary policy. George earned her reputation the hard way: During her tenure on the FOMC, she dissented in favor of tighter policy more than any other Fed official of her era, repeatedly calling for rate hikes before her colleagues were ready to move.

Warsh previously served on the Fed Board of Governors from 2006 to 2011—overlapping with George’s rise through the Kansas City Fed’s ranks—before departing for the private sector. She said she’s watching closely to see how his reform agenda translates into actual policy. “He’s laid out a game plan for this year, of things he wants to look at,” she said.

“All fair game, I think. We’re waiting to see how much [will] change.”

This story was originally featured on Fortune.com