By Ann Saphir and Howard Schneider

Palo Alto, California (Reuters) – Kevin Warsh, a leading candidate for U.S. President Donald Trump’s Federal Reserve chair position, suggested a path to lower policy rates that Trump has sought from current Fed Chair Jerome Powell.

Warsh stated at a monetary policy panel at Stanford University’s Hoover Institution that an expansive Fed balance sheet could hinder the goal of setting short-term borrowing rates. He said, “if the printing press could be quiet, we could have lower policy rates.”

Having served as a Fed Governor from 2006 to 2011, Warsh resigned over his disagreement with the Fed’s balance sheet expansion, which he viewed as central bank overreach encouraging national debt accumulation. The Federal Reserve is currently in the process of reducing its balance sheet.

On Friday, Warsh criticized the Fed again, arguing there isn’t a “cruel choice” between stable prices and full employment. He contested the notion that gaining lower inflation necessitates raising unemployment rates, calling it “nonsense.”

He asserted, “We don’t have to push the unemployment rate up to get the inflation rate to fall.” This perspective aligns with recent Fed practices, as inflation was reduced without significantly increasing unemployment. Powell has indicated a belief that the labor market is not causing inflation, implying that reducing jobs wouldn’t materially impact inflation rates.

Warsh spoke at a conference linked to Bush-Reagan Republicanism, now overshadowed by Trump’s influence in the party. The event honored John Taylor, a renowned monetary policy figure, with speakers including former Bush Secretary of State Condoleezza Rice.

Despite his ties to Trump through his wife, Warsh has not specified what actions the Fed should take if inflation and employment priorities clash, stating that it is a complex discussion as he returned to follow the conference proceedings.