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The Senate Banking Committee advanced Kevin Warsh’s nomination along party lines on Wednesday, putting him on track for confirmation before Powell’s term as chair ends May 15. Like Powell, Warsh will helm a central bank taking a wait-and-see approach to inflationary shocks like the Iran war and Trump’s tariffs, even as the president tries to bend its members to his drive for rate cuts.
But Warsh will be in a tougher bind than Powell, who has withstood a Justice Department investigation into the bank’s renovations and a Trump attempt to fire another Fed governor over mortgage fraud allegations. Powell, who said Wednesday he would remain at the Fed until the latter is “well and truly over,” has shown no interest in heeding the preferences of a president who recently sought assurances that Warsh, if selected, would support lower interest rates.
“I’m sure the president’s going to get annoyed with him if he doesn’t move as quickly on easing interest rates,” retiring Sen. Thom Tillis, R-N.C., who agreed to support Warsh after DOJ started to wind down its probe, told Semafor.
Part of Warsh’s “challenge may be just managing expectations back in the White House,” Tillis added, “about data-driven decisions that this consensus body has to do.”
It’s not just the president watching Warsh: Investors and lawmakers will also keep careful tabs on whether he’s demonstrating the independence from Trump that he publicly pledged. Markets are currently “pricing in Fed credibility,” as Powell termed it on Wednesday, but that goodwill — and Warsh’s relationship with Capitol Hill — could both suffer if the new chair appears too much a creature of the White House.
Complicating things further: Warsh previously embraced a more hawkish approach to monetary policy that’s explicitly at odds with Trump’s call for cheaper borrowing costs.
“He can fudge the issue a bit in the early going, but he can’t fudge it for long — and he’s coming in in a situation that makes the question particularly sensitive and particularly difficult,” said David Wilcox, a former Fed economist now with Bloomberg Economics and the Peterson Institute for International Economics.
Key administration allies may be trying to help Warsh dodge reproach for splitting off. Among them: Treasury Secretary Scott Bessent, who said at Semafor World Economy earlier this month that “the Fed is doing the right thing by sitting and watching” as the Iran war drives oil prices up (a comment Trump promptly pushed back on).
Bessent’s remarks “give Warsh cover to come in and stay on hold for a few meetings,” former Richmond Fed President Jeffrey Lacker said in an interview.
“The extent to which [administration allies] can persuade [Trump] to give Kevin the benefit of doubt in situations that might be coming up in which interest rate cuts wouldn’t be advised or indicated by the data — I think that’s going to be the key,” Lacker added.
Sen. Kevin Cramer, R-N.D., told Semafor that Warsh “knows it’s a hard job,” adding with a chuckle: “I think he’ll be fine. But if not, it’s too late.”
The White House did not respond to a request for comment.
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