Key Takeaways:
The nomination of Kevin Warsh to lead the Federal Reserve advanced to the full Senate after a contentious committee vote Wednesday, a move that could reshape U.S. monetary policy amid pointed criticism of the central bank from President Donald Trump.
The Senate Banking Committee approved the nomination on a 13-11 party-line vote. The approval came just hours before the Federal Reserve announced it would hold its key interest rate in a range of 3.5 percent to 3.75 percent, and as President Trump reiterated his view that rates are too high. "Monetary policy independence is essential. Monetary policymakers must act in the nation's interest," Warsh said in testimony before the committee.
The vote marks a critical step in the transition away from outgoing Chair Jerome Powell, whose term ends May 15. Momentum for Warsh grew after the Department of Justice last week dropped a controversial probe into Powell over office renovation costs, which some lawmakers had seen as a political pressure tactic. Republican Senator Thom Tillis, who had previously withheld support, flipped his vote to approve the nomination. The Fed has held its policy rate steady for its first two meetings of the year after cutting rates three times in 2025.
The confirmation process has highlighted deep divisions over the Federal Reserve's independence. Democrats have expressed concern that Warsh, a former Fed governor and fellow at the Hoover Institution, could be influenced by the president. "You said it’s perfectly fine for elected officials to state their views on interest rates. But that’s not what Donald Trump is doing," Senator Elizabeth Warren, the committee's top Democrat, said to Warsh, referencing the investigation into Powell. Republicans, however, praised Warsh's focus on economic stewardship.
During his previous tenure at the Fed in the late 2000s and early 2010s, Warsh was known as an interest-rate “hawk” who favored higher rates to control inflation. More recently, he has supported lower interest rates, suggesting the central bank should be less concerned about inflation risks from new tariffs.
Powell, who has served as Fed chair since 2018, has weathered months of public attacks from Trump for not cutting rates more aggressively. While Powell's term as chair is ending, his term as a governor on the Fed board does not conclude until January 2028. He has stated he would remain in his position until a successor is confirmed, and has not ruled out serving the remainder of his term as a governor.
This article is for informational purposes only and does not constitute investment advice.
