Kevin Warsh Clears Key Hurdle To Become The Next Fed Chair
The Senate Banking Committee approved on Wednesday Kevin Warsh’s nomination to be the next chair of the Federal Reserve, clearing a key hurdle for his confirmation.
The vote fell along party lines, with 13 Republicans voting in favor of it and 11 Democrats against the nomination. The GOP got enough votes to advance the nomination after Republican Senator Thom Tillis said he would support it following the Department of Justice’s dropping of a criminal investigation on the current Fed chair, Jerome Powell.
Warsh’s nomination is now expected to go to the Senate for a final confirmation vote in the Republican-controlled Upper House.
The development took place hours before the Federal Reserve is expected to keep interest rates unchanged after its meeting ends on Wednesday.
Bloomberg detailed on Tuesday that concerns about the economic impact of the war in Iran, particularly on inflation, along with a stable job market, could lead Fed members to keep its benchmark rate between 3.5% and 3.75%.
Such worries were already present in the last meeting, when some Fed members wanted the central bank to signal it could even raise rates in future meetings, but didn’t get enough support to do so. Ever since, the consumer price index climbed, largely as a result of soaring energy prices.
Warsh would assume leadership of the central bank at a time of economic uncertainty, largely resulting from the economic fallout of the war in Iran.
Both Brent oil and West Texas Intermediate soared more than 5%. The former got close to $117 at 11:07 a.m. and has now increased over 94% since the beginning of the year. The latter topped $105.
The sustained increase accelerated after a report by The Wall Street Journal claiming that President Donald Trump told officials to prepare for an extended blockade of Iranian ports.
The outlet noted that Trump appears to have decided to continue inflicting economic pain on Tehran to bring the country back to the negotiating table. It went on to detail that Trump has concluded that returning to active combat carries significant risk compared to the current scenario. He won’t drop the demand that Tehran suspends uranium enrichment for at least 20 years and accept further restrictions.
Warsh will also face scrutiny over concerns about his independence. A recent survey, conducted by CNBC showed that 46% of respondents believe he will only be somewhat independent or not independent at all.
Warsh was grilled by senators about his independence should he be confirmed in a hearing earlier this month, particularly considering Trump’s demands that interest rates are cut soon to boost economic activity, as well as the stock market.
He claimed that Trump “never once asked me to commit to any particular interest rate decision, period, and nor would I ever agree to do so if he had.”
The president, however, was asked last week if he would be disappointed if Warsh did not push for lower rates as soon as he joined the Fed. “I would,” Trump said.
