Kevin Warsh confirmed as new US Federal Reserve chair amid controversy

Kevin Warsh has been confirmed by the United States Senate to be the chair of the Federal Reserve’s Board of Governors, succeeding Jerome Powell, whose term ends on Friday.

On Wednesday, the Senate voted to confirm Warsh in a 54-45 vote with Senator John Fetterman of Pennsylvania, a Democrat, joining his Republican colleagues amid a contentious confirmation process.

On Tuesday, Warsh, 56, US President Donald Trump’s pick to succeed Powell, was confirmed for a 14-year term by the Senate to join the central bank’s Board of Governors also 51–45 vote with Fetterman voting with Republicans.

Warsh’s swearing-in to both positions awaits final White House signatures on paperwork sent by the Senate.

Independence concerns

Warsh’s confirmation comes amid a slew of concerns about independence at the US central bank and rising inflation.

In his confirmation hearing before the Senate Banking Committee late last month, he was accused of being a “sock puppet” for Trump by Senator Elizabeth Warren.

Warsh, who previously served on the central bank’s Board of Governors from 2006 to 2011, was in favour of rate hikes in 2024 when Joe Biden was US president, but shifted his opinion when Trump came into office, advocating for rate cuts and mirroring Trump’s calls for more aggressive cuts.

In the last year, the Trump administration has pushed for more control over the central bank. Trump tried to fire Fed Governor Lisa Cook, a Biden appointee, amid allegations of mortgage fraud, and called for a Department of Justice (DOJ) investigation into Powell’s management of a building renovation project that a federal judge ruled was a pretext for pressuring Powell to cut rates or resign.

The DOJ dropped the investigation after Senator Thom Tillis of North Carolina, a ranking member of the Senate Banking Committee, said he would not vote to advance Trump’s nominee to lead the central bank until the investigation ended.

Policy shifts

Warsh has pushed for “regime change” within the central bank. He wants a smaller balance sheet, which he argues should allow for a lower policy rate.

The Fed’s next meeting, the first that Warsh will chair, is scheduled for June 16-17.

CME FedWatch, which tracks the likelihood of certain monetary policy outcomes, says there is a 97 percent chance that rates will remain unchanged at the next policy meeting. It is expected that the central bank will maintain interest rates at 3.50 percent to 3.75 percent for the remainder of 2026.

This comes amid surging oil prices and a consumer price index report released on Tuesday showing that consumer prices rose by 0.6 percent in April, after a 0.9 percent increase in March on a monthly basis. There was a more stark increase on an annual basis, and prices rose by 3.8 percent from this time last year.