Senate approves President Trump’s nomination of Kevin Warsh to be the next Chairman of the Federal Reserve System
The Senate has confirmed Kevin Warsh, a former Treasury Department official and former Federal Reserve Board member, as the new chairman of the U.S. central bank.
The Senate on May 13 confirmed Kevin Warsh, a former Treasury official and former Federal Reserve president, as the new chairman of the U.S. central bank, elevating him to a role that makes him one of the world’s most influential economic policymakers.
The Senate approved President Donald Trump’s nominee 54-45. Sen. John Fetterman (D-Pennsylvania) was the only Democrat to join Republicans in voting in favor of Warsh’s nomination. In a similarly divided vote, the Senate approved Mr. Warsh’s new 14-year term on the Fed board the previous day.
Warsh’s confirmation comes amid concerns about the central bank’s independence, given President Trump’s consistent abuse of his former candidate and soon-to-be former Federal Reserve Chairman Jerome Powell, as well as a lawsuit that raises further questions about the central bank’s independence from politics.
Mr. Warsh, 56, served on the Fed’s board of governors from 2006 to 2011 and returns to the central bank at a time when members of the Federal Open Market Committee are somewhat divided over the best direction for interest rates. Rising inflation resulting from the Iran war and a low employment environment in the job market outside of certain sectors such as health care pose risks to both the Fed’s mandate of maintaining price stability and high employment levels.
Christian Frollo, a market strategist at Principal Asset Management, said one of Warsh’s goals as chairman is to foster consensus on the rate-setting committee, but Warsh “doesn’t seem to be as worried about sustained inflation as many current Fed officials.”
He said Warsh appears to be more supportive of lower interest rates now than the market remembers him after the 2008 financial crisis, adding that his focus on improving productivity through AI and his call for a new inflation framework suggest he may be willing to “see out” temporary price shocks.
“The question of perception of Warsh may prove to be just as important as the policy question,” Frollo said in a memo to USA TODAY. “The administration has been vocal about lowering interest rates, so a dovish turn risks increasing scrutiny of the Fed’s independence.”
Warsh said throughout his confirmation hearing on April 21 that he believes central bank independence is important, but added that it “must be earned,” suggesting that independence has not gone far enough in recent years. He said the Fed has “missed the mark” in ensuring price stability for ordinary Americans during and after the coronavirus pandemic, when inflation has reached a 40-year high.
Warsh said that despite Trump’s persistent push to lower borrowing costs, the president has never asked for and has no intention of agreeing to an upfront commitment to lower interest rates.
Interest rates are determined by the FOMC’s 12 voting members, with Mr. Warsh serving as chairman, but with only one vote. If he believes a rate cut is warranted, he will need to convince a majority of his committee colleagues, including Mr. Powell, who said he intends to remain on the Fed’s board for an “undetermined period.” Mr. Powell’s term as director does not officially end until January 2028.
At his final press conference after the committee’s April 29 decision to keep the federal funds rate unchanged at a range of 3.5% to 3.75%, Mr. Powell congratulated Mr. Warsh and said he would “keep a low profile” as governor.
“There has only ever been one chairman of the Federal Reserve,” Powell said. “Once Kevin Warsh is confirmed and sworn in, he will become Chairman. Once he becomes Chairman of the Board, his new colleagues will also elect him Chairman of the FOMC.”
Warsh is expected to push for reform at the Fed during his four-year term as chairman. At his Senate confirmation hearing on April 21, he told lawmakers the Fed needs new tools and a new communication style that is less focused on forward guidance.
Frollo said given Warsh’s call to shrink the Fed’s balance sheet, shrinking it could be one area where investors could see a “meaningful philosophical break from the Powell era.” He added that under the Warsh Fed, the market yield curve could become steeper, with front-end rates lower and long-term rates higher.
“The biggest change may ultimately be less about where interest rates go next and more about how the Fed runs, communicates and manages its balance sheet,” Frollo said.
Contact Rachel Barber rbarber@usatoday.comFollow her on X @rachelbarber_and subscribe to her newsletter Making More of Your Money here.
