Kevin Warsh Confirmed as Next Fed Chairman by US Senate as Inflation Mounts
Kevin Warsh was confirmed Wednesday as the next chairman of the Federal Reserve, stepping into the role at a moment when rising inflation is placing the central bank in a difficult position.
The Senate approved President Donald Trump’s nominee by a 54-45 vote, with Sen. John Fetterman of Pennsylvania standing as the only Democrat to support him. Just one day earlier, Warsh had secured confirmation to a 14-year term on the Fed’s Board of Governors in a tight 51-45 vote.
Warsh is set to take over from outgoing Chair Jerome Powell by the end of the week, inheriting an economic landscape where inflation is climbing even as Trump continues to advocate for lower interest rates.
Powell’s term as chair ends Friday, but he is expected to remain on the board as a governor—an uncommon arrangement that could lead to friction within the institution as Warsh begins to steer monetary policy at a time when inflation pressures are expected to increase amid the Iran war.
“The Fed has a predicament,” Derek Reisfield, co-founder and original chairman of MarketWatch, told The Post.
“While there is a lot of pressure to lower rates, typically in a rising inflation environment, the Fed would be hesitant to lower rates. That might fuel inflation more.”
New government data released this week showed consumer prices rising 3.8% in April compared to a year earlier, marking the highest annual increase since mid-2023 and a notable jump from March’s 3.3% rate.
Core inflation, which strips out volatile items, rose 2.8% year over year, while the Fed’s preferred core PCE measure remains above 3%.
Skanda Amarnath, executive director of Employ America and a former Fed economist, said inflation has been stronger than expected for months, even excluding swings in gasoline prices, and warned that conditions may worsen.
“Even the more flattering inflation measures Warsh pointed to at his confirmation hearing are now turning the other way,” Amarnath told The Post.
Warsh has long argued that the Fed damaged its credibility by maintaining loose monetary policy following the pandemic.
During his confirmation hearing last month, he criticized the central bank’s 2020 framework, saying it contributed to “the inflation surge … we’re still living with.”
He also faulted Fed officials for signaling their rate decisions too clearly in advance.
“We need central bankers who are humble, who are nimble, who are open-minded, who can react,” Warsh told lawmakers.
At the same time, Warsh has suggested that advances in artificial intelligence could eventually boost productivity enough to ease inflationary pressures and allow interest rates to decline over time.
Powell is remaining on the board in part due to ongoing questions surrounding the Fed’s costly headquarters renovation project.
The issue prompted a Justice Department investigation into whether Powell misled Congress about rising costs. Although prosecutors dropped the criminal case, Powell has said he intends to stay until the matter is “well and truly over” and to ensure the Fed’s independence is safeguarded from political interference.
Justice Department officials have indicated they could revisit the case if the Fed’s Office of Inspector General uncovers evidence of wrongdoing.
Reisfield said one of the main contributors to the recent inflation spike has been disruptions tied to the Strait of Hormuz, where instability has pushed up energy prices and disrupted supply chains for key materials from the Persian Gulf.
“These are all basic supply inputs to a ton of things, like fertilizer, computer chips, etc.,” Reisfield said. “So everything that relies on those inputs, which is pretty much everything in our economy, is going to cost more.”
A central question for the Fed, Reisfield said, is whether policymakers believe the current inflation spike will be short-lived.
“If the Iran war is over soon, those prices will drop,” he said. “One question will be how quickly.”
Amarnath noted that markets may still be underestimating the likelihood that the Fed could raise rates again if inflation remains elevated.
“The debate now is why or why not hike — not why or why not cut,” he said.
Such a move would put the central bank on a collision course with Trump, who has repeatedly criticized Powell for not lowering rates more aggressively.
{Matzav.com}