Warsh Clinches Senate Approval to Be Fed's Next Chair as Inflation Intensifies

  • 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.
  • 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. 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 the 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 labour market may not need the support of a rate cut. March's projections for a ​single rate cut this year look increasingly stale as the unemployment rate hovers around 4.3%, indicating the labour 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.

(Source: Reuters)