Share to ClassroomKevin Warsh Confirmed as New Federal Reserve Chair
The United States Senate has confirmed Kevin Warsh as the next chair of the Federal Reserve, the central bank whose decisions on interest rates shape American mortgages, business loans and global financial markets. He will take charge this week. The 54– 45 vote on Wednesday fell largely along party lines and ended a tense nomination process. Warsh will succeed Jerome Powell, whose term as chair concludes on Friday. In a break with tradition, Powell will not leave the institution outright; he will retain his seat on the Fed's governing board and his vote on the Federal Open Market Committee (FOMC) , the 12-member panel that sets US interest rates. A former Morgan Stanley executive, Warsh previously served as a Fed governor from 2006 to 2011, acting as the central bank's liaison to Wall Street during the financial crisis.
President Donald Trump nominated Warsh after months of public clashes with Powell, whom Trump repeatedly accused of being incompetent for refusing to cut borrowing costs more aggressively. Confirmation was delayed when the Department of Justice opened a criminal investigation into the Fed, prompting Senator Thom Tillis to block a committee vote in protest; he relented only after a US attorney agreed to drop the inquiry. During his hearing, Warsh argued there was room to lower rates but vowed to exercise independent judgment, denying Senator Elizabeth Warren's charge that he would serve as the president's sock puppet. Warren countered that he was uniquely ill-suited for the role and had been installed to do Trump's bidding.
Warsh inherits a difficult balancing act. The Labor Department reported that the cost of living rose 3.8% over the past year, the steepest annual increase in nearly three years, with food, housing and air-fare prices all climbing. Price pressures have intensified since the war with Iran disrupted tanker traffic through the Strait of Hormuz and pushed up crude-oil and gasoline costs. At the FOMC's April meeting, three members signalled that their next move could be a rate increase rather than a cut. Warsh has also called for broader reforms, including improvements to how the government measures inflation and how policymakers communicate with the public. One legal scholar told the BBC (British Broadcasting Corporation) that the new chair faces Mission Impossible.
