Kevin Warsh was sworn in on Friday at the White House as the Chairman of the Federal Reserve Board of Governors, succeeding Jerome Powell in one of the world’s most influential economic posts.
Warsh, 56, steps into the four-year term amid mounting uncertainty over inflation, geopolitical conflicts, and volatile financial markets, alongside increasing political pressure on the central bank’s independence.
“I expect he will go down as one of the truly great Fed chairs we have ever had, I truly believe that,” President Donald Trump said during remarks in the East Room, his first public appearance with Warsh since nominating him earlier this year. “He has abilities that very few people have, he covers a lot of ground, and he is universally respected.”
Warsh did not mince words about the significant changes he sees for the Fed, which he highlighted in brief remarks after being sworn in.
“I will lead a reform-minded Federal Reserve, learning from past successes and failures, avoiding static frameworks and models, while upholding clear standards of integrity and effectiveness,” Warsh stated.
Selected by Trump in January when expectations pointed toward stabilizing growth and cooler inflation, Warsh now takes the helm of an economy shifting under the weight of a US-Iran war. A fuel shock has sharply increased gasoline prices, mortgage rates have climbed to a nine-month high, and headline inflation has accelerated to a three-year high.
The American consumer has remained surprisingly resilient, continuing to spend despite rising prices and shielding the economy from recession. However, affordability concerns have left many Americans unhappy with the economy, potentially leading to significant political consequences for the midterm elections. Consumer sentiment is at a record low, with Americans feeling worse off now than during the wars, 9/11, the Great Recession, the Covid-19 pandemic, and the subsequent inflation surge.
President Donald Trump arrives with new Federal Reserve Chairman Kevin Warsh for Warsh’s swearing-in ceremony at the White House in Washington, D.C., on May 22.
President Donald Trump arrives with new Federal Reserve Chairman Kevin Warsh for Warsh’s swearing-in ceremony at the White House in Washington, D.C., on May 22. Evelyn Hockstein/Reuters
This sets Warsh up for a tougher balancing act and immediately puts pressure on him to clarify how the Fed will react to the US economy’s tensions: hold rates steady and wait for clarity, or move to a tighter stance if inflation proves harder to tame.
Warsh is widely seen as a Trump ally, who has aggressively pushed for lower rates and even joked about suing Warsh if he did not lower borrowing costs. Trump has argued that rates should be lower to reduce government borrowing costs and stimulate economic growth.
But on Friday, Trump stated he wants Warsh to “be completely independent.”
“Don’t look at me, don’t look at anybody, just do your thing and do a job and do a great job,” Trump added. He repeatedly chastised Powell for not lowering rates quickly enough, calling him “dumb” and a “good mental person,” and threatened to fire him.
Warsh has emphasized his own duty to lead the Fed independently with the goals of lowering inflation and stronger economic growth.
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What happens if the President directs the Fed?
However, a single Fed chairman cannot lower rates. The central bank’s monetary policy — the Federal Open Market Committee — sets rates based on current economic conditions and outlook, not on the demands of the sitting president.
On Friday, Trump stated he believes Warsh “has the temperament and leadership qualities to foster cooperation among the entire board, and I am confident he will welcome vigorous debate in his mission to maintain price stability and high employment. Kevin will have the full support of my administration.”
Although Fed policymakers in March projected a rate cut later this year, they have changed their thinking in recent months, weighing the economic consequences of rising energy prices and geopolitical instability. Most policymakers are now advocating for holding rates steady, with some even raising the possibility of an increase.
Warsh’s first meeting as Fed chair is scheduled for June 16-17.
A New Era for the Fed
Warsh has signaled several key changes for the central bank, including limiting how much Fed officials communicate with the public about where they think interest rates should be.
Warsh also strongly advocates for the Fed not to engage in issues outside of its core responsibilities. This aligns with Trump’s viewpoint.
“The Fed has lost its way in recent years,” Trump said.
“It has gotten distracted on issues far afield from its core mission and mandate, wading into issues like climate policy and DEI initiatives, and the Fed has strayed from its mandate.”
Powell was particularly keenly aware of issues on these topics during his chairmanship. “The Federal Reserve is not, and will not be, a ‘climate policymaker’,” Powell stated in a 2023 release. “Decisions about policies to address climate change are the domain of the elected branches of government.”
But he did note that the Fed has “narrow but important responsibilities regarding financial risks associated with climate.”
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