Senate confirms Trump pick Warsh as chairman of the Federal Reserve, following Powell

The Senate has confirmed President Donald Trump’s nomination to lead the Federal Reserve, Kevin Warsh, bringing new leadership to the world’s most powerful central bank at a perilous moment for the global economy.

Note: Video from a previous report.

Warsh’s nomination was confirmed Wednesday in a largely party-line vote. His nomination has been thrown into doubt in recent months after Republican Sen. Thom Tillis of North Carolina said he would block the nomination while the Justice Department investigates Federal Reserve Chairman Jerome Powell. Powell’s investigation was dropped last April, paving the way for the Senate to confirm Warsh’s nomination.

Senate Majority Leader John Thune urged his colleagues to support Warsh during a speech Wednesday morning, saying it was critical that the Fed chair “understand not just macroeconomics” but also “appreciate microeconomics: that is, hard-working Americans, their jobs and their livelihoods.”

“Kevin Warsh is just someone like that,” Thune said.

Warsh, 56, a former senior Federal Reserve official, will head the agency at an unusually difficult time for the independent agency.

Inflation has exceeded the Fed’s 2% target for five years, and is now rising more rapidly due to rising gas prices. The Federal Reserve’s interest rate-setting committee is divided and last month saw the largest number of dissenting votes in more than three decades. Powell, after years of personal attacks from the Republican president and an unprecedented legal investigation by the Justice Department, plans to remain on the Fed’s board even after his term as chairman ends, potentially creating a rival power center.

Trump called for change at the Federal Reserve

The Fed has faced numerous threats to its independence from Trump, who has repeatedly attacked Powell for not lowering interest rates. Trump also sought the firing of Federal Reserve Governor Lisa Cook and launched an investigation into brief Senate testimony by Powell about the building’s renovation.

Kevin Hassett, director of the White House National Economic Council, said in an interview with Fox News on Sunday that he believes markets are comfortable that Wershe “will help lower interest rates over time.”

“Clearly the data depends on that,” Hassett said. “I’m not putting any pressure on Kevin Warsh.”

In December, Trump said on his social media platform that he wanted a Fed chairman who cuts interest rates when the stock market goes up — the opposite of what conventional economics describes — and added: “Anyone who disagrees with me will never be Fed Chairman!”

Trump’s comments raised concerns about whether Warsh would set interest rates based on economic conditions or seek to lower interest rates to appease Trump, even if doing so could worsen inflation. At Warsh’s confirmation hearing last month, Senator Elizabeth Warren, a Democrat from Massachusetts, mocked him as a “sock puppet” for Trump. Warsh declined to say that Democrat Joe Biden won the 2020 election against Trump, who falsely claimed that voter fraud cost him his re-election.

However, Warsh denied at the hearing that Trump pressured him to lower the Federal Reserve’s key interest rate.

“The president never asked me to commit to any particular interest rate decision,” Warsh said at the time. “And I would not agree to do that if he did… I would be an independent representative if I were appointed chairman of the Federal Reserve.”

A critic of the Fed’s leadership in the past

Warsh strongly criticized the Fed’s recent record, particularly the rise in inflation in 2021-2022, the worst in four decades, and called for “regime change.” However, he only provided an outline of what this change would involve.

He has called for limiting the Fed’s communications, marking a sharp shift after decades of increased transparency. He argued that some of his communication tools, such as quarterly forecasts about where the key interest rate might head, made it difficult for officials to change course.

Senate Democrats also condemned Warsh for not fully disclosing details of his vast wealth, which disclosures show amount to at least $100 million. His investments include stakes in Polymarket and SpaceX, but he did not disclose the size of those holdings. He promised to sell all these assets within 90 days of taking the oath.

“He will be the richest Fed chairman in history, but he refuses to provide transparency to the American people about who he is involved with,” Warren said.

Warsh faces difficult economic conditions

The Fed is still grappling with how to respond to the 50% rise in gas prices due to the Iran war. This increase boosted inflation, which reached 3.8% in April.

Congress tasks the Fed with maintaining price stability, which it seeks to do by raising the short-term interest rate to make borrowing and spending more expensive, and to cool growth and inflation.

The Fed typically ignores temporary price increases caused by supply disruptions, such as a wartime cutoff of oil through the Strait of Hormuz, because these prices usually stabilize—or even fall—once supply is restored.

But the Fed also took this approach after the coronavirus pandemic disrupted global supply chains for goods, pushing up prices of things like cars, furniture and electronics. Inflation turned out to last longer than expected, and Powell and other Fed officials admitted they had waited too long to raise interest rates. Inflation rose to 9.1% by June 2022.

The Federal Reserve’s rate-setting committee kept interest rates unchanged for three consecutive meetings as it assesses the impact of rising gas prices. At its last meeting last month, three committee members objected to language suggesting its next step would be to lower interest rates. They preferred more neutral language that allowed for longer walks. Many Fed watchers saw that opposition as a warning to Warsh that he would not be able to engineer interest rate cuts easily.

The fourth member of the 12-member committee, Stephen Meiran, objected in favor of lowering interest rates, as he has done at every meeting since Trump appointed him to the Federal Reserve board last September. Miran will serve until a replacement is named, and Warash will take his place.

Meanwhile, Powell said in a news conference on April 29 that he will remain Fed governor until the Justice Department closes its investigation into the Fed’s construction project, marking the first time a president may remain on the board for an extended period since 1948. His term as governor runs until January 2028.

US Attorney General Jeanine Pirro dropped the government’s investigation, but said it could be reopened if the Federal Reserve’s inspector general, who has looked into the renovation project since last July, finds evidence of criminal activity.