The U.S. Central Bank, the Federal Reserve, cleared a Senate hurdle to confirm nominee Kevin Warsh as its new chief. With worries about inflation from a prolonged Iran war intersecting with pressure from U.S. President Donald Trump to cut interest rates, observers say the new Fed chair faces a serious test of monetary policy independence.
On the 13th, local time, the U.S. Senate held a floor vote and passed the motion to confirm Warsh by 54-45, according to AP and major outlets. A day after approving him as a Fed governor, the Senate sped through the chair confirmation in just one day. The new chair, Warsh, will succeed current chair Jerome Powell, whose term ends on the 15th, to take the helm of the world's largest economy. The term is four years. Warsh is expected to complete the remaining asset divestment procedures, be sworn in, and, as early as this week, officially take office.
Markets are focusing on the tough economic conditions and political headwinds facing Chair Warsh. With the outbreak of war with Iran and the closure of the Strait of Hormuz sending oil prices sharply higher, U.S. inflation jumped to 3.8% in April. Although expectations for rate cuts are receding on fears of reignited inflation, President Trump has continued to call on the Fed to cut rates. In December last year, Trump said on his social media that he wanted a chair who lowers rates when the stock market rises, pressuring that "anyone who disagrees with me will never become Fed chair."
Chair Warsh strongly denied allegations during his hearing that he would be a puppet and repeatedly emphasized the Fed's independence. He pledged, "If confirmed as Fed chair, I will be an independent actor," dismissing concerns about pressure from President Trump. Some, including Sen. Elizabeth Warren, raised conflict-of-interest concerns over Warsh's wealth, estimated at at least $100 million. In response, Warsh promised to dispose of all related asset holdings, including SpaceX, within 90 days of taking office.
Stabilizing the Fed's internal organization, unsettled by pressure for Powell's resignation and various lawsuits, is also an urgent task. Warsh's leadership will face its first assessment at the Federal Open Market Committee's regular meeting, held for two days starting on the 16th of next month. Major outlets said attention is on what balance he will strike between the Trump administration, which treats rate cuts as a foregone conclusion, and Fed Commissioners who are not bending from a monetary tightening stance to curb inflation.