Senate confirms Trump pick Warsh as chairman of the Federal Reserve, following Powell

WASHINGTON (AP) — The Senate confirmed President Donald Trump’s nominee to lead the Federal Reserve, Kevin Warsh, bringing new leadership to the world's most powerful central bank.

Warsh, 56, a former top Fed official, was confirmed Wednesday in a largely party-line 54-45 vote and will replace Jerome Powell as chair.

Inflation has topped the Fed’s 2% target for five years and is now rising faster because of spiking gas prices. The Fed’s interest rate-setting committee is divided and saw the most dissenting votes in more than three decades last month. And Powell plans to remain on the Fed’s board even after his term as chair ends, potentially creating a competing power center.

Senate Majority Leader John Thune, R-S.D., said in a floor speech that it's critical that a Fed chair “understand not only the macro” but also “appreciate the microeconomy: and that’s the hardworking Americans, their jobs and their livelihoods.”

“Kevin Warsh is just such a person,” Thune said.

Trump has repeatedly attacked Powell for not cutting interest rates. Trump also sought to fire Fed governor Lisa Cook and launched an investigation into Powell’s Senate testimony about a building renovation.

The probe of Powell had threatened to derail Warsh’s nomination, as Republican Sen. Thom Tillis of North Carolina vowed to withhold support until the investigation was terminated. The probe was ultimately dropped in April. Every Republican voted for Warsh on Wednesday, as did Democratic Sen. John Fetterman of Pennsylvania.

Kevin Hassett, director of the White House’s National Economic Council, said in a Fox News interview on Sunday that he believes the markets are relieved that Warsh “is going to help lower interest rates over time.”

“Obviously, data driven,” said Hassett. “I’m not putting any pressure on Kevin Warsh.”

Warsh has been highly critical of the Fed’s recent track record, particularly the inflation spike in 2021-22, the worst in four decades.

He has argued that some of its communications tools, such as quarterly forecasts of where its key rate may head, have made it harder for officials to switch gears.

The Fed is still grappling with how to respond to the 50% spike in gas prices caused by the war in Iran. The increase has boosted inflation, which reached 3.8% in April.

The Fed is tasked by Congress with keeping prices stable, which it seeks to do by raising its short-term rate to make borrowing and spending more expensive, cooling growth and inflation.

The Fed typically looks past temporary price increases that stem from supply disruptions, such as the war’s cutoff of oil through the Strait of Hormuz, because those prices typically level off — or even fall — once supply is restored.

But the Fed also followed that approach after the coronavirus pandemic snarled global supply chains. Inflation turned out to last longer than expected, and Powell and other Fed officials have acknowledged that they waited too long to raise rates. Inflation surged to 9.1% by June 2022.

The Fed’s rate-setting committee has kept rates unchanged for three straight meetings as it evaluates the spike in gas prices.

Powell, meanwhile, said at a news conference on April 29 that he would remain as a Fed governor until the Justice Department closes its investigation into the Fed’s building project, the first time a chair may stay on the board for an extended period since 1948. His term as a governor lasts until January 2028.

U.S. Attorney Jeanine Pirro has dropped the government’s probe, but she has said it could be reopened if the Fed’s inspector general, which has looked into the renovation project since last July, finds evidence of criminal activity.