The U.S. Senate confirmed Kevin Warsh as Federal Reserve chair Wednesday in a 54-45 vote, the narrowest margin in history for the position. The approval came just days before Jerome Powell's term as chair ends on Friday, May 15, according to Bloomberg. Markets are watching whether Warsh will resist President Donald Trump's repeated calls for lower interest rates as inflation pressures build.
Senate vote splits along party lines with one Democrat defecting
The confirmation largely followed party lines, but Pennsylvania Democrat John Fetterman crossed over to support Warsh. Warsh had been confirmed as a Fed governor the day before. During his hearing, he pledged the Fed would remain "strictly independent" and not act as Trump's "sock puppet." Trump has publicly pressured the Fed to cut rates for months and frequently criticized Powell's policies. Powell plans to remain on the Fed board after stepping down as chair, with two years left on his governor term.
Warsh served on the Fed board from 2006 to 2011, during which he criticized elements of quantitative easing. His past views may influence his approach, though he has not laid out specific rate plans.
Inflation hits 3.8%, rate cut expectations evaporate
Warsh takes office as inflation accelerates. April CPI hit 3.8% year-over-year, the highest since May 2023. Energy prices surged after disruptions linked to the Strait of Hormuz, while food, housing, and airfare costs also rose. Markets have pared back expectations for rate cuts this year, with some analysts now predicting rates will stay unchanged into 2027. Warsh's first Federal Open Market Committee meeting is set for June 16-17.
The shift in expectations has pushed bond yields higher and reduced the odds of near-term easing. Warsh's first policy decision will be closely watched, given his previous skepticism toward large-scale asset purchases.
House Republicans push to narrow Fed mandate to inflation only
Separately, House Republicans advanced legislation to strip the Fed of its dual mandate and focus solely on inflation. The current mandate requires both maximum employment and price stability. Representative French Hill praised Warsh after the vote, citing his focus on affordability and price stability. Warsh replaces Stephen Miran as Fed chair.