Warsh to be sworn in as Fed chief during White House ceremony

Kevin Warsh, who’s promised the biggest shakeup in decades at the US central bank, is set to be sworn into office Friday in a White House ceremony as the 17th chair of the Federal Reserve.

Warsh takes over at a tense moment for the economy and the central bank. Inflation has reaccelerated, driven by the impact of war in the Middle East on energy supplies. The Fed, meanwhile, has been battered by President Donald Trump for not cutting interest rates quickly enough.

That backdrop of persistent inflation and political pressure has stoked concern among investors and analysts that the Fed’s independence is under threat. In his confirmation hearing for the job, Warsh repeatedly pledged to act independently even as he criticized the central bank for what he called mission creep and its response to the pandemic inflation surge.

While past nominees for the Fed chair have made joint appearances with the president at the White House, Warsh’s swearing in ceremony is sure to draw scrutiny from investors and Fed watchers for any commentary from Trump that reprises his demand for lower interest rates, possibly setting the tone for relations between the pair in the months ahead.

Read More: Fed Transition Investor Survey: Warsh Expectations

Some of the president’s allies are eager to help Warsh avoid the same fate as the outgoing chair, Jerome Powell, who has been one of Trump’s favorite punching bags since his first term. Officials sensitive to market gyrations and cognizant of the importance of Fed independence to bond traders, like Treasury Secretary Scott Bessent and Fox Business’ Larry Kudlow, have publicly made comments giving Warsh cover to leave rates unchanged for a time.

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Similar messages have been delivered privately, according to people familiar with the matter, and the effort may be working, at least for now.

Asked in an interview with the Washington Examiner on Tuesday whether he thinks Warsh will lead the Fed to cut rates, Trump said he was going to let the new Fed chief “do what he wants to do.”

Warsh isn’t the first Fed chair to take the oath in the presence of the president. George W. Bush attended the swearing in of Ben Bernanke in 2006 at the central bank’s headquarters while Ronald Reagan hosted Alan Greenspan’s ceremony at the White House in 1987.

The US Senate confirmed Warsh as chair on a 54-45 vote earlier in May. The vote was the slimmest confirmation margin ever for a Fed chair, reflecting partisan divides in Congress and concerns among Democratic lawmakers that Warsh may be receptive to Trump’s demands on interest rates.

‘Regime change’

Warsh has promised to bring “regime change” to the central bank, including by shrinking the Fed’s $6.7 trillion balance sheet, establishing a new framework for analyzing inflation and changing how the institution communicates with the public.

His most immediate challenge may come on the policy front. Ahead of receiving Trump’s nomination for the chair job, Warsh laid out a case for why rates could be lower. But Fed officials are showing little appetite to deliver near-term reductions amid concerns about inflation, which accelerated in April by the fastest pace since 2023.

Policymakers left interest rates unchanged last month in a range of 3.5% to 3.75%, but revealed a deepening divide over how to signal where policy may be headed as the Iran war continues to roil energy markets. Four officials voted against the decision, including three who objected to language in their post-meeting statement that suggested the central bank would eventually resume cutting rates.

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The 8-4 vote marked the first time since October 1992 that four officials dissented against a Federal Open Market Committee decision. Minutes from that policy meeting showed a majority of officials warned they would likely need to consider raising interest rates if inflation continues to run persistently above their 2% target.

The leadership transition at the Fed is also made unusual by Powell’s decision to remain on the Board of Governors, breaking with the precedent of past chairs leaving the institution at the end of their leadership terms. His term as a governor runs to January 2028.

Powell said ongoing legal threats against him and the central bank left him with no option but to stay. The last outgoing chair to remain on the board was Marriner Eccles, who stayed on as a policymaker until 1951 after his term as head of the central bank ended in 1948.

Trump has attempted to fire Fed Governor Lisa Cook and his Department of Justice launched a criminal investigation into a $2.5 billion renovation of the central bank’s Washington headquarters, a probe that held up Warsh’s confirmation before US Attorney Jeanine Pirro said she was dropping it.

Powell has said he’s staying on to support the Fed’s independence from political interference and not to undermine his successor.

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