By Nolan D. McCaskill and Ann Saphir
WASHINGTON, May 13 (Reuters) – The U.S. Senate on Wednesday approved Kevin Warsh as chair of the Federal Reserve, putting the 56-year-old lawyer and financier at the helm as the U.S. central bank grapples with intensifying inflation that may make it hard to push through the interest-rate cuts that President Donald Trump has demanded.
The vote was 54-45 in the most-partisan-ever U.S. Senate confirmation of a Fed chair. A single Democrat, John Fetterman of Pennsylvania, voted with the Republican majority.
His swearing-in to the four-year Fed chair term and a concurrent 14-year term as a Fed governor approved by the Senate on Tuesday awaits final White House signatures on paperwork sent by the Senate.
Trump, in China for meetings with President Xi Jinping, “intends to sign paperwork as soon as possible to restore confidence in Fed decision-making,” a White House official said.
Warsh will take the leadership baton from Fed Chair Jerome Powell, whose term ends on Friday but who will remain a Fed governor. Fed Governor Stephen Miran, currently the central bank’s biggest advocate of rate cuts, will vacate his spot on the board to make room for Warsh.
Expected to be in place to chair the Fed’s next meeting June 16 to 17, Warsh joins a central bank whose policymakers are engaged in a debate over the possibility of rate hikes that Trump picked Warsh to avoid.
Some Fed policymakers are concerned that inflation is broadening even beyond the impact of the Trump administration’s tariffs and the spike in oil prices from the Iran war.
An index of producer prices, a key component of overall inflation, jumped 6% in April from a year earlier, the Labor Department reported on Wednesday. That’s the fastest pace since December 2022 when the Fed was battling a 40-year record surge in prices with sharp rate hikes.
Analysts expect the Personal Consumption Expenditures price index to have risen 3.8% last month, moving further from the Fed’s target of 2%.
In the run-up to his first meeting, Warsh may have to navigate a divided group of policymakers with growing support for more hawkish language indicating that a rate increase is as likely as a rate cut in coming months. At least five of the Fed’s 19 policymakers have said they wanted that change as of April.
Also in June, Fed policymakers are scheduled to release fresh rate-path forecasts. March’s projections for a single rate cut this year look increasingly stale as the unemployment rate hovers around 4.3%, indicating the labor market may not need the support of a rate cut. However, inflation has continued to gain steam: a government report on Tuesday showed consumer prices rose in April at the fastest pace in three years.
Financial markets now expect no change to the Fed’s 3.5%-3.75% policy rate target this year, with a rate hike as soon as January.
PARTISAN DIVIDE
The tight vote on Warsh poses a challenge for an institution overseen by Congress whose leaders have often been confirmed on a voice vote or with broad bipartisan support. The most partisan vote on a Fed chair by the Senate until now was a 56-26 vote in 2014 for Janet Yellen, with 11 Republicans joining the Democratic majority on a cold January day when canceled flights kept many lawmakers from participating.
Trump has been badgering the central bank for rate cuts and has undertaken what Powell calls a “series of legal attacks” on the central bank. Those include an attempt to fire Fed Governor Lisa Cook last year. Trump’s Department of Justice also launched a criminal investigation of Powell which it has dropped for now but has left the door open to reviving.
It was those attacks that had some Democrats cast a “no” vote despite feeling Warsh was qualified for the job.
“I have serious concerns about whether he will be able to remain fully independent in the face of political pressure from the White House,” said one such senator, Mark Warner of Virginia. “I hope that as chairman, he proves those concerns unfounded and demonstrates clearly that he will defend the Fed’s independence, follow the data, and put the long-term stability of the American economy above the whims of this president or any other.”
Powell’s decision to buck tradition and stay on at the Fed beyond the end of his chair term, at least until the DOJ probe is definitively closed, was similarly motivated by concern that the Fed continue to be able to set interest rates free of political pressure.
Treasury Secretary Scott Bessent, who has joined Trump in criticizing the Powell Fed, welcomed Warsh’s leadership “at an institution that is in need of accountability, sound policy guidance, and the renewed sense of purpose to help guide our economy.”
Trump expects Warsh to advocate for lower rates, and Warsh had expressed support for Trump’s view. Still, he told senators at his confirmation hearing last month that he had not made any promises on rates, though he vowed to deliver big changes including increased cooperation with the administration on non-monetary policy matters.
Warsh is no stranger to discord within the Fed. As a Fed governor during Ben Bernanke’s tenure as chair, he expressed reservations about policy, though he left the Board in 2011 before ever casting a dissenting vote.
At his confirmation hearing he told senators he welcomes a “family fight” at the Fed as policymakers hammer out the right monetary policy response to economic conditions.
(Reporting by Howard Schneider, Nolan McCaskill, Ann Saphir and Nandita Bose; Editing by David Gregorio)
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