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Kevin Warsh to lead Fed amid rising inflation
Kevin Warsh received Senate approval on Wednesday and will become the 17th chair of the Federal Reserve. He will take over the central bank at a time when the Fed has long been under political pressure from President Donald Trump, while the US economy is grappling with the effects of geopolitical tensions that are pushing inflation higher.
According to CNN, Warsh will officially succeed Jerome Powell, whose eight-year tenure at the Fed was marked by several economic crises and a fierce clash with the White House over the protection of the US central bank’s political independence.
Warsh’s nomination was approved in a 54-45 vote. The vote largely followed party lines, with Pennsylvania Senator John Fetterman being the only Democrat to support his nomination. It became the most partisan vote on a Fed chair nominee in history and highlighted Democrats’ concerns over Trump’s conflict with the regulator. Republicans, by contrast, broadly welcomed Warsh’s appointment.
Expectations for the new Fed Chair
Warsh is seen as more aligned with Donald Trump, who has long called for lower interest rates. However, he is taking office amid mounting inflationary pressure caused by the US-Israeli war with Iran. According to the latest Consumer Price Index data, inflation reached a three-year high in April and is now growing faster than wages.
The energy shock is complicating expectations for a quick rate cut. Investors now expect the Fed to keep its benchmark rate unchanged until the end of the year — or even raise it if inflation continues to accelerate. Such a scenario would likely frustrate Trump, who could shift his criticism to Warsh in the same way he previously targeted Powell. Earlier this year, the president even joked that he would sue Warsh if he failed to cut rates.
At the same time, the Fed chair has only one vote on the Federal Open Market Committee, which makes decisions on interest rates. Warsh will be able to set the agenda for meetings, but he will not have unilateral authority over the decision supported by the majority of the committee. For now, a group of voting Fed officials has already signaled serious concern over inflation risks.
Who is Kevin Warsh?
Kevin Warsh is an American financier, lawyer, and former member of the Board of Governors of the Federal Reserve System. He served at the Fed from 2006 to 2011, including during the 2008 global financial crisis, and was considered one of the close advisers to then-Fed Chair Ben Bernanke. Before joining the Fed, Warsh worked at Morgan Stanley and also held a position in the administration of President George W. Bush. He was educated at Stanford and Harvard Law School.
After leaving the Fed, Warsh remained active in academic and investment circles: he worked at the Hoover Institution and advised major financial institutions. In economic circles, he has often been described as a supporter of tight monetary policy and a fighter against inflation, although in recent years his views have moved closer to the rhetoric of Donald Trump, who has pushed for lower interest rates.
As a reminder, the U.S. House of Representatives passed four bills related to financial services.
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