Kevin Warsh becomes Fed chair in 54-45 vote as central bank independence faces new test

Kevin Warsh cleared the Senate on Wednesday and became the next Federal Reserve chair after a brutal 54-45 vote, handing Trump a new central bank chief while the inflation picture is getting uglier.

Kevin is taking over Jerome Powell at the exact time when Trump wants low interest rates, despite the recent price readings offering little wiggle room for the Fed. Markets do not like these kind of situations because there is politics one way and high inflation on the other hand, along with a new Fed chief stepping into the middle of all this chaos.

Kevin’s confirmation came after an election process that started way back in the summer of 2025, when the government began searching for a replacement for Jerome. The 56-year-old man is going to be the 11th Fed chair in the post-war era. However, his confirmation came almost entirely partisan because only Democrat John Fetterman of Pennsylvania supported his nomination.

Powell will serve his term till Friday, but he does not intend to leave the Fed yet. In fact, he still has two more years of being a Fed governor, and he mentioned last month that he is determined to finish the probe regarding the Fed building renovations first. It has been about 80 years since a Fed chair returned to the Fed.

Kevin takes charge while Trump pushes for lower rates

Trump has been here before, and that history is now hanging over Kevin. In November 2017, Trump picked Jerome to run the Fed instead of Kevin, who was then a younger former Fed governor. Trump believed Jerome would be easier to deal with. He later regretted that call as the two clashed over rates.

At this moment, the million-dollar question being asked in the market is whether Trump regrets choosing Kevin, just like he regrets the appointment of Jerome. Trump once told everyone that “Fed chairs tend to change once they get the job done.” This quote means a lot because Kevin may lack the political immunity Jerome enjoyed from his boss.

It looks like Kevin will be pushing “regime change” within the Fed system. This will certainly not be a pleasant message for the Fed with its preference for slow and measured actions, its cultlike processes inside, and its love of soft wording. And it’s his duty to convince members who see an uptick in inflation as something dangerous. It would have been difficult to imagine anything else as the crux of the matter here.

There are those within the financial sector who believe that either he thinks too highly of his ability to influence processes within the Fed’s inner workings or is too close to Donald Trump to do so effectively. His progressive adversary Elizabeth Warren, a Democrat from Massachusetts, referred to him as Trump’s “sock puppet”.

And yet there are some aspects which complicate this picture. Last year, Kevin told Donald not to remove Jerome. Such words undoubtedly saved the reputation of the Fed since getting rid of Jerome could have served the interests of Kevin quite well. In spite of all these reservations, he was nominated by Trump in January.

Inflation keeps Kevin from handing Trump a quick cut

The problem with cutting rates has already become one of the top priorities for Kevin. The president clearly wants lower rates and said he would be disappointed if Kevin fails to deliver. In his recent hearing before the Senate Committee on Banking, Housing, and Urban Affairs, Kevin insisted he had not made any promise to the president regarding rapid rate reductions.

As reported by the federal statistics agency, the consumer price index rose to 3.8% in April. This increase was mostly attributed to the energy shock associated with events in Iran. Core inflation, which excludes highly volatile energy prices, increased for the third consecutive month. Now, some policymakers at the Fed think that interest rates may need to stay higher for longer to address inflationary pressures, even if geopolitical tensions in the Middle East ease.

However, the central bank does not seem to be interested in a quick rate cut yet. But according to Kevin, the Fed has wasted too much time reacting to small short-term movements in the inflation data and has already lost some credibility among market participants.

As evidence, he cited expectations for future inflation levels as measured by surveys conducted among financial investors and households.

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