financetom
Economy
financetom
/
Economy
/
Warsh takes over Fed with a policy problem already in view
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Warsh takes over Fed with a policy problem already in view
May 22, 2026 3:26 AM

WASHINGTON, May 22 (Reuters) - Kevin Warsh, whose broad criticism of current U.S. Federal Reserve officials, playbook for rate cuts and ties to President Donald Trump elevated him past other contenders to lead the central bank, will be sworn in as Fed leader Friday at a pivotal moment for monetary policy and the American economy.

An unfolding boom in artificial intelligence technology is reshaping the economy in ways Fed officials say could be profound for workers, companies and consumers, but will be hard for Warsh and his colleagues to assess in real time. 

At the same moment inflation is already high and potentially heading higher as the economy copes with shocks including oil driven over $100 a barrel by the U.S.-Israeli war with Iran, high import tariffs and utility and some other costs rising due to the AI rollout.   

Warsh, 56, won Trump's backing for the job over the course of what became a year-long public audition among the top candidates - including one who will be seated alongside him on the Fed's Board of Governors. Trump plans to swear Warsh in at 11 a.m. ET (1500 GMT) at the White House.

Warsh has laid out ambitious reform goals for a central bank he argues had begun to lose its way by the time he quit his former seat as a governor in 2011 in opposition to Fed bondbuying. Now, though, his first months may be consumed with a more pressing dilemma: Whether to raise interest rates to keep inflation from moving further beyond the Fed's 2% target, or put his credibility as an inflation fighter, the quality he will ultimately be judged by, at risk from the outset. 

"Inflation is the Fed's choice," Warsh said at a Senate confirmation hearing, with its control over short-term interest rates a lever it can use to boost or discourage spending, and in doing so try to keep inflation at a target the Fed has set at 2%. The Fed has missed its target for more than five years and is currently more than a percentage point above it.

 But how to get inflation back down can involve hard choices that sometimes conflict with the policies and goals of the Trump administration, and sometimes with the Fed's other aim of maximum employment. Warsh will be looking over his shoulder from the moment he takes the oath of office as the Fed's 11th chair - at a global bond market that has begun bidding up interest rates in a sign of growing inflation concern, at colleagues who have already been setting expectations that higher rates may be needed, and at Trump, who has viewed rate hikes as a political assault on his economic program and been mercilessly critical of outgoing Fed Chair Jerome Powell for not lowering borrowing costs.

Warsh's comments and approach to ongoing disputes surrounding the Fed, including a coming Supreme Court decision on Trump's so far unsuccessful effort to fire Governor Lisa Cook, also will be watched and compared closely to Powell's staunch defense of Fed independence.

The debate over policy is already at a high pitch, with Fed Governor Christopher Waller, a Trump appointee who was interviewed for the chair's job, speaking on his policy views Friday ahead of Warsh's swearing-in ceremony. 

Waller, a longtime Fed staff veteran who has emerged as a key policy voice since being appointed to the board, has grown steadily more cautious about the need for rate cuts as inflation concerns have intensified. A further hawkish drift on his part could further reset market views that the Fed may need to raise interest rates in coming months, or at best keep the current rate in place for an extended time. 

 Trump soured on Powell within months of making him chair - over Warsh - in 2018. He calls him "too late" for not cutting interest rates even as tariffs and energy costs kept inflation above the Fed's target this year. In recent comments, though, he seems to have given Warsh a grace period - and so far no nickname.         

The Fed's next meeting is on June 16-17 when policymakers vote on interest rates and also submit new economic projections.

One of Warsh's first substantive decisions will be whether to submit a "dot" of where he thinks interest rates will be at the end of this year, and in doing so reveal whether his views are not so different from the colleagues he has slammed for "groupthink," or become an outlier with views that could further confuse markets that are already driving up U.S. long-term interest rates.

The Fed's monetary policy decisions influence an array of consumer-facing and politically sensitive interest rates like those on home mortgages, while its "choice" on inflation is now being made in the context of sticker shock over things like $4.50-per-gallon gasoline that are beyond its immediate reach.

Those have become visible reminders of Trump's lack of progress on a key presidential promise that "starting on day one, we will end inflation and make America affordable again," which is now in Warsh's hands to deliver.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
Anew Climate Expands Carbon Market Capabilities in Singapore
Anew Climate Expands Carbon Market Capabilities in Singapore
May 22, 2026
HOUSTON, TX / ACCESS Newswire / May 21, 2026 / Anew Climate today announced the expansion of its carbon market capabilities in Singapore, supported by the Singapore Economic Development Board (EDB)'s Carbon Project Development Grant, marking a strategic step in the company's continued growth across global carbon markets. The grant follows Anew's recent announcement of the opening of its Singapore...
Trump will swear in Warsh on Friday to lead US Federal Reserve
Trump will swear in Warsh on Friday to lead US Federal Reserve
May 22, 2026
WASHINGTON, May 21 (Reuters) - U.S. President Donald Trump will swear in Kevin Warsh as the chair of the Federal Reserve on Friday at the White House, the Trump administration said on Thursday. Warsh was confirmed to the role in a near party-line vote on May 13. He succeeds Jerome Powell as the chair of the central bank, though Powell's...
Warsh takes over Fed with a policy problem already in view
Warsh takes over Fed with a policy problem already in view
May 22, 2026
WASHINGTON, May 22 (Reuters) - Kevin Warsh, whose broad criticism of current U.S. Federal Reserve officials, playbook for rate cuts and ties to President Donald Trump elevated him past other contenders to lead the central bank, will be sworn in as Fed leader Friday at a pivotal moment for monetary policy and the American economy. An unfolding boom in artificial intelligence...
Nomura pivots away from Fed rate cuts in 2026 as inflation risks linger
Nomura pivots away from Fed rate cuts in 2026 as inflation risks linger
May 22, 2026
May 22 (Reuters) - Nomura has joined a growing chorus of brokerages expecting the U.S. Federal Reserve to hold interest rates steady in 2026, citing persistent inflation and skepticism that policymakers will rally behind rate cuts. Fed officials are increasingly worried that the war in Iran could add to inflationary pressures, with a growing number open to raising interest rates...
Copyright 2023-2026 - www.financetom.com All Rights Reserved