Kevin Warsh May Throw President Donald Trump Under the Bus in His First FOMC Meeting as Fed Chair

It's been a history-filled past five weeks on Wall Street. We've witnessed:

• The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) reach all-time closing highs.
• The largest initial public offering in the stock market's history, courtesy of SpaceX.
• A changing of the guard at America's foremost financial institution, the Federal Reserve.

The latter shift is of particular importance to a historically pricey stock market. Jerome Powell's final day as Fed chair on May 15 paved the way for President Donald Trump's handpicked successor, Kevin Warsh, to officially take the job as head of the Fed on May 22.

Although Warsh was previously a Federal Open Market Committee (FOMC) member from Feb. 24, 2006, to March 31, 2011, today, June 17, marks the first time he'll head an FOMC meeting -- and it's a doozy. U.S. inflation hit a three-year high in May, setting the stage for a potential shift in the central bank's monetary policy.

Fed Chair Kevin Warsh at his White House swearing-in ceremony. Image source: Official White House Photo by Daniel Torok.

It also positions Fed Chair Warsh to follow in the footsteps of his predecessor, Jerome Powell, and throw Donald Trump under the bus for America's elevated inflation.

Fed Chair Warsh may throw President Trump under the bus over inflation

For more than a year leading up to Powell's departure as Fed chair (he remains on the Board of Governors), President Trump and Powell publicly feuded over the path of interest rates.

Trump often chastised Powell and the FOMC for not aggressively cutting interest rates to 1% or lower. Slashing borrowing costs would be expected to boost hiring, lower mortgage rates, and make servicing the nation's $39.2 trillion in debt considerably less costly.

Meanwhile, Powell held firm amid Trump's criticisms that economic data, not political persuasion, would sway the FOMC. Powell frequently pointed to the president's policies as the source(s) of elevated inflation, and thus the reason interest rates couldn't be reduced.

In his first FOMC meeting as Fed chair, Kevin Warsh is likely to take a page out of Powell's book and place the onus of elevated inflation on the president.

BREAKING: May CPI inflation rises to 4.2%, the highest level since April 2023.

Core CPI inflation also rises to 2.9%, the highest since September 2025.

Inflation in the US is officially back above 4% and more than double the Fed's target.

Odds of Fed rate hikes are rising.

-- The Kobeissi Letter (@KobeissiLetter) June 10, 2026

Over the last 14 months, the U.S. economy has contended with two separate price shocks. The first, Trump's tariff and trade policy, is having only a modest effect on goods sector inflation. Nevertheless, implementing a sweeping tariff on most imports -- specifically unfinished goods -- has increased production costs for some domestic manufacturers.

The bigger issue is Iran-war-driven inflation. The president's decision to attack Iran on Feb. 28 led to the latter closing the Strait of Hormuz to nearly all commercial vessels. The largest energy supply disruption in history has propelled the trailing 12-month (TTM) inflation rate from 2.4% in February to 4.2% in May -- a three-year high.

Worse yet, the effects of this historic energy supply disruption on businesses are just beginning to show up in economic data, implying that TTM inflation can head even higher.

There's likely not a way for Fed Chair Warsh to avoid throwing Donald Trump and/or his policies under the bus for making his and the FOMC's job of stabilizing prices and maximizing employment exceptionally challenging.

Image source: Getty Images.

A subtle but powerful monetary policy shift may be imminent

On top of potentially throwing the president under the bus, the new Fed chair and the other 11 FOMC members may be on the verge of an imminent monetary policy shift.

Despite rapidly rising inflation, no change in the federal funds target rate is expected at today's FOMC meeting. It's not uncommon for policymakers to look to the horizon when dealing with energy supply shocks, making a wait-and-see approach with interest rates highly likely.

But this doesn't mean there won't be changes. More than likely, we're going to witness a shift away from an easing bias to a neutral one.

At Powell's final meeting as Fed chair on April 29, four FOMC members voiced their dissent, three of whom disagreed with the inclusion of the easing bias statement. Three weeks later, the Fed's April meeting minutes showed that a majority of voting members favored shelving the easing bias statement. With inflation now at a three-year high, the table has been set for Warsh and the FOMC to officially move to a neutral stance.

However, if you ask Wall Street, the probability of interest rate hikes before the end of the year is rapidly climbing. The probability of an FOMC rate hike by the December 2026 meeting, according to the CME Group's FedWatch Tool, has jumped from less than 50% to closer to 60% over the last two weeks.

"If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh."@AnnaEconomist pic.twitter.com/FGMfeSqHpU

-- Daily Chartbook (@dailychartbook) January 31, 2026

Though Kevin Warsh represents just one of 12 votes, his label as a monetary hawk (i.e., someone who favors higher interest rates to suppress inflation) makes it likelier that rates eventually rise.

For Wall Street, Kevin Warsh can be viewed as a necessary evil. The prospect of raising interest rates is horrible news for a historically pricey stock market that's been counting on low lending rates to fuel the artificial intelligence infrastructure build-out. Conversely, higher rates may be needed to avoid serious damage to the U.S. economy and consumers' wallets.

Regardless of what happens later today, Kevin Warsh is set to make an indelible mark on the Fed and Wall Street.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.