Trump Says He Talked to Warsh. What Does That Mean for Fed Independence?

President Trump said he talked to Warsh before yesterday's rate decision, raising new questions about the Fed's independence, plus House lawmakers head home ahead of the elections. Some critics say they should be passing more bills. There have been around 104 laws that have been enacted in the current Congress, which is putting it at pace for fewer than any past Congresses since the Civil War. And the UK's King Charles wades into the AI safety debate. It's Thursday, September 17th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Today investors are still processing the Fed's latest rate decision and Chairman Kevin Warsh's press conference. And closely watched aspect was what it meant for Warsh's relationship with Trump, and whether the Fed can withstand pressure from the President. During the press conference following the decision announcement, Warsh repeatedly told reporters that he didn't, quote, have anything for you on discussions with Trump. But he reiterated the Fed's independence. Part of the independence of the Federal Reserve is we stay in our lane. Independence is a two way street. We'll let people that do trade policy and fiscal policy stay in their lane too. That's how we can stand up here and calm the way we see him. But then Trump complicated this picture yesterday evening, Trump told reporters that he had talked to Warsh about this decision before it was announced. I talked to Kevin and I said, you might as well vote with the board because it's not going to matter. The board is very hostile. They're very political. They're doing the wrong thing. They're bunch of politicians or people put on by politicians. For more, I'm joined now by WSJ Washington bureau chief Damian Poletta. Damian, we just heard President Trump's comments. What do we know about this conversation between him and Warsh? Now this is only President Trump's version of the conversation. We don't know whether the conversation happened the day they decided to raise rates or perhaps earlier, maybe the day before or a week before. All we know is that President Trump said they talked about this interest rate decision. So just what President Trump said, if true, would be an incredible conversation and potentially a breach of this independence that has built up between the Fed and the White House for many decades. But right now, we only have the White House's version of this conversation. The Fed has not weighed in to either confirm this or give an alternate version of the conversation. Some investors interpreted yesterday's decision as a sort of reassertion of the Fed's independence because it goes against President Trump's previous statements. Does this conversation now call that into question? What's really interesting is, was this a one-off? Is this just Kevin Warsh saying, "Hey, listen, I got to raise interest rates. I just want you to understand where I'm coming from so that President Trump doesn't attack the Fed." Which the President did not attack the Fed, you know, to Kevin Warsh's credit. However, is this going to happen every time there's a Fed meeting? The Fed chair, Kevin Warsh, is going to call the White House and either explain this decision or ask the White House's input on the decision. That's a real slippery slope for two reasons. One, it gives the President, in this case President Trump, the idea that he has some say and interest rate policies. And then the final point is, the Fed is a board. Yes, Kevin Warsh is a chairman and he's supposed to lead these decisions and convince the rest of the board to go along with him. But if other members of the board are worried, there might be some political influence in these decisions or that the Fed chair is talking about them and how to kind of manipulate them with the White House, that could erode the credibility of the Fed as well. That was WSJ Washington Bureau Chief, Damian Poletta. US stocks were up and Treasury yields down today as investors shook off the rate-hike jitters. Some investors realized that they might have overreacted yesterday to Warsh's hawkish tone. The NASDAQ rose 1.7%, the S&P 500 added 1.1%, and the Dow was up 0.6%. Meanwhile, the 10-year Treasury yield fell below 5%. Brent crude futures dropped 2% to trade below $104 a barrel. House Speaker Mike Johnson said earlier this week that lawmakers could go back to their districts this week, rather than later this month, for the final campaign stretch until November's election. But the early dismissal comes amid simmering concerns about high gasoline prices, the dangers of artificial intelligence, and criticism that Congress just isn't doing its job. Drone reporter Maya Davis joins me now from Washington. Maya Johnson claimed yesterday that the House has had its second most productive session since 1789, he said it had passed more than 900 bills, but that it's the Senate's fault for not getting the put into effect. Is that accurate? The productivity is just so hard to measure. What we do know, though, is that the Senate is in for more voting days and in for longer hours than the House. And a lot of these bills that Speaker Mike Johnson is mentioning really matter only if they're passed into law. One argument that I've seen is that House Speaker Mike Johnson made this decision to send lawmakers home early in part not to take on certain votes that maybe the House was supposed to, and the latter half of this week, has he said anything about that? This Congress still had a lot to do, and the House specifically. One of the things that was top of mind was a gas tax suspension. There also this week has been a lot of perceived an action from Congress on AI. There was also a surprise legislation that was introduced to impeach the Secretary of Defense Pete Hegseth. Also, over all of this, what's looming is the Save America Act. This is something that the President has directed criticism at the majority leaders in Congress for, and when voters are hearing about this over and over again, it really builds on that frustration. So will the House have to pick up some of these votes when they come back after the midterms? They're not going to vote until after November, which means that all of the members are going to be out. The ones that are running for election focusing on that. One of the things that I think is important to mention is both Congress has passed a bipartisan government funding bill that ends December 11th. So when the Chamber's return, they're going to have to tackle getting more funding for the government in order to avoid a government shutdown. That was WSJ reporter Maya Davis. Well, as critics say, U.S. lawmakers aren't doing enough to address AI's potential dangers, the UK's King Charles is getting into the debate. He gathered executives from companies including Nvidia, Anthropic and Open AI in Scotland today. In an address, he urged the leaders to hash out guidelines to keep the technology from spinning out of control. The seems urgency in adequately considering the existential dangers of such technologies falling into the wrong hands and being used in potentially catastrophic ways. Surely, then, we need sufficient means of control before it is all too late. The unusual get-together comes as countries outside the U.S. and China feel increasingly uneasy about being shut out of the decision-making over AI safety. Speaking of AI, would you let it do your shopping? MasterCard is the latest credit card company to hope you will. More after the break. We've been hearing a lot about inflation and how it's remained high, especially as oil prices have gone up. Yesterday, the Fed raised rates to combat it, but some amount of how inflation plays out comes down to whether business owners choose to raise prices. And lately, they've been left to figure out whether they think higher prices are here to stay and what to do about it. General reporter Owen Tucker-Smith has been talking to business owners, and he says some of them are convinced this is the new normal, and they're adjusting their own prices accordingly. Many business owners, over the last six months, have started to see high-energy prices start to creep into their costs. These people, at the beginning, thought of this as something that they were going to have to get through, but they'd get through it, and so they weren't necessarily jumping to raise prices, especially because if you raise prices, it could turn off consumers or a stretch pretty thin. But at this point, we've gotten to this sort of breaking point for a lot of businesses, where they're starting to say, "We can't really treat half a year of sustained high-energy prices as a temporary thing anymore." And so some of these businesses are starting to try to rescue their profit margins by increasing prices. So, when their supplier maybe imposes a 10% fuel surcharge on them, that's going to go down to their customer. I spoke with a business owner in New Hampshire, who is part of a big supply chain for plastics that powers the electric grid. And she, for months and months, was convinced that they could get through it. They were not a business that raised prices very often, but the cost of resin, which is used in the plastic parts that she makes, had spiked 40%, and that just became unsustainable, so she started passing that cost to lunch or her customers. But there's a second camp of people, Owen says, who think that now is actually the time to do the opposite, and they're lowering prices. A lot of these businesses are catering to consumers, who they're dealing with prices go up and up, and they're now seeing their gas bills go up and up. And so, if there's a cheaper option, they're going to go for it. And so, if you're a mass retailer that's catering to these people, you might see this as a time where you could try to get some market share. There is also a degree to which these are the decision makers of the economy. It's not always these people that we imagine in Washington. It's the people who just are sitting in rooms deciding, has this gotten to the point where we have to increase prices. You know, that'll have big implications for the rest of the year, the prices that consumers see when they get there. go to the store. Today, MasterCard rolled out an AI payment option for everyday purchases through a partnership with the startup Alchemy. MasterCard provides the AI agent with a virtual credit card to make purchases, but that comes with a set of restrictions such as a cap on how much it can spend and on what type of products. Then the bot can buy things on its own without consulting the credit card holder or first seeking permission. Ben Glickman covers payments for the journal and it's here now with more. Ben what is the appeal or advantage of using an AI bot to make purchases? The idea is that there can be a lot of convenience gain from allowing AI to either find products for you or let AI do some of the tedious checking back over and over that you might do for buying things that fluctuate in price. So flights or hotel rooms or concert tickets. If there's some sort of item that is not really of super great concern to you but you don't want to spend the time looking through six or 10 or 20 different options and you want AI to do it for you. It can do that. The idea is that it saves you time. So MasterCard isn't the only company to introduce agentic commerce. Visa and American Express already have tools like this each with their own standards. Why is MasterCard doing this and why now? MasterCard and Visa and American Express and really a lot of other companies in payments world have been rolling out standards and tools and partnerships over the last year and a half. The idea being that they want to be ready when eventually this is the kind of thing that consumers are clamoring for. The goal is to establish more trust. So there's a system in which each transaction captures what the user's intent was when they communicated with their AI bot about a purchase. If there's some stake you can trace back to what the original intent was and kind of go from there and then there's other things like caps on how much you can spend which are meant to give people some peace of mind that your AI bot is not going to accidentally go and buy some $20,000 object on eBay. It's going to take some time I think before even the small portion of the public is comfortable having their AI bot buy something for them without at least checking with them before making a purchase. That was WSJ reporter Ben Glickman and finally general motors is supplying parts for Lockheed Martin's Patriot missiles as the military contractor looks to ramp up production. Earlier this year the Pentagon ordered Lockheed to more than triple its Patriot output to more than 2,000 missiles a year by the end of 2030 and the effort has taxed the company's supply chain. GM delivered an initial batch of missile housing components last month. People familiar with the matter say the automaker is in talks to supply Lockheed with parts for other missile lines as GM works to expand its military-related business. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansi and Danny Lewis with supervising producer Melanie Roy. I'm Alex O'Saleff for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.