Kevin Warsh was confirmed Wednesday as the next chairman of the Federal Reserve, stepping into the role at one of the most economically volatile moments in recent years as inflation surges again and pressure mounts from both Wall Street and the White House.
The Senate voted 54-45 to confirm President Trump’s pick, with Sen. John Fetterman (D-PA) standing as the lone Democrat to support him. Just one day earlier, lawmakers narrowly approved Warsh for a 14-year term on the Federal Reserve Board of Governors.
Warsh is expected to formally replace outgoing Fed Chair Jerome Powell by the end of the week. But he inherits a central bank facing a growing dilemma: inflation is climbing again even as President Trump continues demanding lower interest rates to stimulate growth and ease borrowing costs.
“The Fed has a predicament,” Derek Reisfield, co-founder and original chairman of MarketWatch, told The Post. “While there is a lot of pressure to lower rates, typically in a rising inflation environment, the Fed would be hesitant to lower rates. That might fuel inflation more.”
Fresh economic data released this week underscored the problem. Consumer prices rose 3.8 percent in April compared to a year earlier — the highest inflation reading since mid-2023 and a sharp jump from March’s 3.3 percent pace. Core inflation climbed 2.8 percent year-over-year, while the Fed’s preferred core PCE inflation gauge remains above 3 percent.
The renewed inflation spike comes amid economic fallout from the ongoing Iran war, which has disrupted energy markets and intensified concerns over supply chains tied to the Strait of Hormuz.
“These are all basic supply inputs to a ton of things, like fertilizer, computer chips, etcetera,” Reisfield explained. “Everything that relies on those inputs — which is pretty much everything in our economy — is going to cost more.”
Warsh has spent years criticizing the Federal Reserve’s post-pandemic monetary policies, arguing the central bank damaged its credibility by flooding the economy with cheap money and fueling inflation that Americans are still dealing with today.
At his Senate confirmation hearing last month, Warsh sharply criticized the Fed’s 2020 policy framework overhaul.
“The inflation surge we’re still living with was fueled by those decisions,” he argued.
He also blasted the Fed’s habit of publicly signaling future rate decisions too aggressively, arguing central bankers need greater flexibility and humility.
“We need central bankers who are humble, who are nimble, who are open-minded, who can react,” Warsh told lawmakers.
Still, Warsh has also expressed optimism that artificial intelligence and productivity gains could eventually help cool inflationary pressures over the long term, potentially allowing rates to fall naturally without reigniting inflation.
Complicating matters further is Jerome Powell’s unusual decision to remain on the Fed’s Board of Governors even after stepping down as chair. Powell has said he wants to stay while lingering controversy surrounding the Federal Reserve’s massively over-budget headquarters renovation project continues to play out.
That renovation triggered a Justice Department investigation into whether Powell misled Congress about escalating costs. Although prosecutors dropped the criminal probe, DOJ officials have indicated the matter could reopen if the Fed’s inspector general uncovers evidence of misconduct.
Inside the Fed, Powell’s continued presence could create tension as Warsh attempts to reshape monetary policy while distancing the institution from the very policies he has spent years attacking.
Meanwhile, some economists warn markets may still be underestimating how serious the inflation problem has become.
Skanda Amarnath, executive director of Employ America and a former Fed economist, argued inflation has consistently outperformed expectations for months even after excluding volatile energy prices.
“Even the more flattering inflation measures Warsh pointed to at his confirmation hearing are now turning the other way,” Amarnath said.
He added that investors may need to start considering the possibility that the Fed eventually raises rates again rather than cutting them.
“The debate now is why or why not hike — not why or why not cut,” he said.
