Warsh sworn – Kevin Warsh was sworn in as Federal Reserve chair for a four-year term on May 22, replacing Jerome Powell. President Donald Trump said he expects a “totally independent” chair, while economists and investors look ahead to Warsh’s first rate decision in mid-Jun
When Kevin Warsh walked into the spotlight at the White House and took the oath as the next Federal Reserve chair, President Donald Trump made the line he wanted to be heard—loud and personal.
“I want him to be independent,” Trump said as Warsh was sworn in on May 22 for a four-year term. “Don’t look at me. Don’t look at anybody.”
Warsh. 56. accepted the role with language that sounded less like politics and more like a promise about how decisions would be made. “It’s the honor of a lifetime to be called back into public service. and with this oath. I’ve accepted a high and solemn responsibility. ” he said during the ceremony. His goal. Warsh added. is to create an environment where “the best people can do their life’s best work. ” facing “every challenge in the spirit of common purpose and devotion to the national interest. ” with an aim “to excellence.”.
He inherits a Fed confronting a difficult mix: inflation that’s still above the central bank’s 2% target, an economy that has been growing but feels less convincing to households, and an institution whose independence has become a public battleground during Trump’s second term.
Warsh replaces Jerome Powell, who has served as Fed chair since 2018. Powell said he intends to keep “a low profile” as a Fed governor after Warsh was confirmed. and Trump previously nominated Powell for his first term as chair in 2017. During the following year. Trump criticized Powell. telling the Washington Post he was “not even a little bit happy” with the appointment.
In this second term. Trump has pressured the Fed to lower its benchmark interest rate and has acted to exert influence over the central bank. prompting concerns about the institution’s independence. At Tuesday’s ceremony. Trump also said he expects Warsh will go down as one of the Fed’s “truly great” chairs and that his nominee will have “full support” from his administration.
Warsh is no stranger to the Federal Reserve. He served on the Fed’s Board of Governors from 2006 to 2011. including a stretch when the central bank navigated fallout from the 2008 financial crisis. Now he’s returning at a consequential moment. with inflation surging as a result of the Iran war and with lingering concerns about stagnation in the job market outside select industries.
The economy Warsh is inheriting looks, in some ways, familiar to Powell’s early days as chair. In the first quarter of 2018, the U.S. economy grew at an annual rate of 2%. matching the Bureau of Economic Analysis’ advance estimate for the first quarter this year. Unemployment also looks similar on the surface: it was 3.9% in April 2018 and 4.3% in the same month this year.
But the inflation backdrop is different. Prices rose 2.5% year-over-year in April 2014, compared with a 3.8% increase in April this year.
Thrivent’s Chief Financial and Investment Officer David Royal put it plainly: the biggest challenge for Warsh is “an economy that’s solid, employment that’s fine but not spectacular, and inflation that’s stubbornly above their 2% target by every measure.”
Outside the official data, households are sending their own signal. Consumers’ optimism about the economy is at a record low. The University of Michigan’s measure of consumer sentiment fell for the third straight month in May, dropping to 44.8. In that survey. Joanne Hsu. Surveys of Consumers director. said 57% of respondents told the survey that high prices were “eroding” their personal finances.
The pressure won’t be just on rates—it will be on communication. Warsh and Powell share a similar résumé path: both moved from being Fed governors to chair. But Wall Street sees Warsh as more than a familiar face. ConnectOne Bank Founder and CEO Frank Sorrentino said Warsh is known in financial markets and no stranger to the central bank. which may help him build consensus inside the Federal Open Market Committee.
Still. Sorrentino said Warsh is pushing for a different style—one that he believes reduces the chance of turning monetary policy into a market-moving script. “When the Fed speaks, the market reacts,” he said. “Sometimes it could be the precursor to what policy decisions they want to make. getting the market to sort of anticipate and move in that direction.”.
Sorrentino argued Warsh wants to avoid politicizing the process. “I just think Warsh doesn’t think that’s a smart way of going about running an independent Fed, because you do run the risk now of politicizing the decisions.”
Warsh has also suggested reforms at the Fed. During his confirmation hearing, he called for a new inflation framework and communications less focused on forward guidance.
Even with that, investors will be watching whether Warsh’s policy instincts point in a new direction. Royal suggested Warsh may carry a different approach to what data should drive decisions than Powell did. noting that Powell’s Fed decisions have depended on the information available to policymakers at the time of their meetings.
Sorrentino described Warsh as looking further ahead—citing views on the money supply, the Fed balance sheet, interest rates generally, the impact AI is having and will continue to have on the economy. “He wants to get ahead of things,” Sorrentino said.
The policies Warsh has supported in recent months are also part of the question investors are now trying to answer. While he was once seen as focused on keeping inflation tame through higher rates, he has more recently advocated for lower borrowing costs.
Royal said there may be two reasons behind that shift. First, Warsh sees AI-driven productivity as potentially disinflationary. Sorrentino explained the logic: AI is expected to make work faster and cheaper. potentially increasing the supply of goods and services. That could, through supply and demand, push prices lower.
Still, Robbins—Jacob Robbins, an assistant professor of economics at the University of Illinois—advised caution. He previously told this outlet, “You should be very sure of how AI is going to affect the economy before you should call for lower interest rates at this moment.”
Second, Royal said Warsh is advocating for shrinking the Fed’s balance sheet. If that happens, Sorrentino said, it would likely reduce liquidity in the economy, which could reduce asset values and eventually lead to lower inflation.
Sorrentino said Warsh believes the Fed balance sheet is distorting the economy: “there’s too much cash running around chasing after assets,” he said. To make the case, Sorrentino referenced “look where gold is, look where the markets are, and look where crypto is… They’ve been inflated.”
That blend of views—AI optimism paired with concerns about liquidity—lands in a market that may not be ready for smooth sailing. Historically, markets have dipped after the confirmation of new Fed chairs. Royal said investors shouldn’t be surprised if volatility arrives again after Warsh is sworn in.
“He’s not a current Fed member. He’s less of a known commodity than some other Fed chairs are when they take over, so I would just be watching for that volatility,” Royal added.
Warsh’s first test as chair is already scheduled. The FOMC’s next rate decision is in mid-June, and it will mark Warsh’s first decision in the role. As of May 22, forecasters predict policymakers will hold the federal funds rate steady at a range of 3.5% to 3.75% as they have so far this year.
Federal Reserve Kevin Warsh Jerome Powell Trump Fed independence federal funds rate inflation unemployment consumer sentiment AI productivity balance sheet FOMC