Senate confirms Kevin Warsh as next chair of the Federal Reserve

Kevin Warsh won Senate approval to be the next chairman of the Federal Reserve. He takes over at a time when soaring gasoline prices have put upward pressure on inflation.

Andrew Harnik/Getty Images North America

Andrew Harnik/Getty Images North America

President Trump’s pick to lead the Federal Reserve won Senate confirmation on Wednesday, just in time to officially take over as the leader of the central bank this week.

Trump is hoping Kevin Warsh can lead the Fed into much lower interest rates — but the president could be frustrated by persistent inflation.

Warsh was confirmed on a 54-45 vote, mostly along party lines. Hehas argued there’s room to lower rates, but he also promised to use his own judgment in setting monetary policy — and not to take orders from the White House. Warsh denied charges from Sen. Elizabeth Warren, D-Mass., that he would be Trump’s “sock puppet.”

Warsh will replace Jerome Powell, who has led the Fed since 2018. Although Trump appointed Powell to the job, he has relentlessly criticized the outgoing Fed chairman for not moving more aggressively to lower borrowing costs. Powell’s term as chairman ends on Friday.

Warsh’s confirmation as chair was delayed after President Trump waged a pressure campaign against the Fed, with the Justice Department even launching a criminal investigation of the central bank. But Sen. Thom Tillis, R-N.C., initially blocked a committee vote on the nomination to protest that probe, with the senator dropping his opposition only after a U.S. attorney agreed to drop the probe.

Powell will stay on

In a break with tradition, Powell will remain on the Fed’s governing board for a period of time after stepping down as chairman. That’s unusual since Fed chairs typically leave the central bank when their term as the head is done. But Powell is determined to safeguard the institution from political pressure.

He has vowed to keep a low profile and not try to overshadow Warsh. But Powell will continue to have a vote on the 12-member committee that sets interest rates.

Some members of that committee are wary of cutting rates at a time when inflation is stubbornly above their 2% target, and moving in the wrong direction. Price pressures have only increased since the war with Iran snarled tanker traffic in the Strait of Hormuz, triggering a spike in the cost of crude oil and gasoline. At the last rate-setting meeting in April, three members of the committee hinted their next move could as easily be a rate increase as a cut.

A report from the Labor Department Tuesday said the cost of living had increased 3.8% in the last twelve months, the biggest annual increase in nearly three years.

Warsh has called for other changes at the Fed. He has suggested improvements in the way the government measures inflation and proposed changes in the way Fed policymakers communicate with the public.

Warsh previously served on the Fed’s governing board from 2006 to 2011. The former Morgan Stanley executive served as a liaison from the central bank to Wall Street during the financial crisis.

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