Warsh Nomination Raises Questions About Fed Rate-Cut Prospects

President Donald Trump nominated former Fed governor Kevin Warsh to replace Jerome Powell as chair, urging rate cuts. The nomination rose after U.S. Attorney Jeanine Pirro said she would drop a probe into Powell’s testimony, but the Senate Banking Committee is split: Republican Sen. Thom Tillis will not vote until the investigation ends, and all Democrats oppose the pick.

Associated Press

Inflation rose to a two-year high of 3.3 % in March, above the Fed’s 2 % target, while the short-term rate is about 3.6 % and unemployment is 4.3 %, which the Fed calls “maximum employment.” The Iran war’s impact on oil and gas prices has pressured price stability, weakening the case for swift cuts.

UsNews and World Report

Warsh would join a 12-member Federal Open Market Committee that voted 11-1 in March to keep rates steady. Governors Stephen Miran and Michelle Bowman have occasionally favored cuts, but a larger bloc now leans toward hikes. Futures pricing and the CME FedWatch tool show little chance of a cut before October 2027; analysts expect rates to stay unchanged through September 2026.

UsNews and World Report

At his confirmation hearing, Warsh pledged to act independently of political pressure and stressed the Fed’s duty to “bring inflation back down.” Treasury Secretary Scott Bessent said he understood if the Fed chose to “wait for some clarity” before cutting, a remark seen as giving Warsh leeway to keep the stance.

UsNews and World Report

Democratic senators have questioned Warsh’s independence. Sen. Elizabeth Warren warned that installing him would amount to “an illegal takeover of the Fed,” and flagged incomplete disclosures of his holdings in firms such as SpaceX and Polymarket. Economists say Warsh’s earlier optimism that AI-driven growth could justify cuts now appears “muddied,” undermining confidence in his outlook.

UsNews and World Report

Warsh previously argued that AI would enable rate reductions, yet his hearing remarks qualified that “we don’t know that, we can’t bank on that.” The precise size of his private-sector investments remains undisclosed, leaving a transparency gap.

UsNews and World Report

• “The president never once asked me to commit to any particular interest rate decision, period,” — Kevin Warsh, Nominee for Fed Chair

Associated Press

• “we have a short window to try to bring inflation back down to where it should be,” — Kevin Warsh, Senate hearing

Don't count on rate cuts just yet: Warsh as Fed chair may not lead to big policy changes

• “The Senate should not be aiding and abetting Donald Trump’s illegal takeover of the Fed by installing his chosen sock puppet as chair,” — Elizabeth Warren, Senator

Associated Press

• “Warsh’s stated outlook is much more consistent with an extended hold than additional cuts,” — Aditya Bhave, BofA Securities

Don't count on rate cuts just yet: Warsh as Fed chair may not lead to big policy changes

The Fed’s next policy meeting, likely Powell’s final one, is expected to keep rates unchanged. The Senate will continue debating Warsh’s confirmation amid the Powell investigation, while markets watch for any shift that could affect long-term borrowing costs.

Associated Press