Senate Confirms Kevin Warsh As Fed Governor, Another Step Toward Becoming Chair

The Senate on Tuesday confirmed Kevin Warsh as governor of the Fed, taking another step towards replacing Jerome Powell as chair of the central bank.

The Upper House voted 51-45 to confirm Warsh for a 14-year term as one of the body’s seven governors. It still needs to vote whether to confirm him as Fed chair to replace Powell, whose four-year term ends on Friday.

Warsh’s views on the central bank’s independence are under scrutiny, with former policymakers questioning how his approach could affect the body’s authority during periods of economic stress tied to war and inflation.

Warsh, nominated by President Donald Trump to replace Jerome Powell as the head of the central bank, has said the Fed should remain “strictly independent” in setting monetary policy, while signaling openness to cooperation with Congress and the administration in other areas. In written responses to lawmakers, he said, “Fed officials are not entitled to the same special deference in areas affecting international finance, among other matters,” according to CNBC.

That distinction has left economists and former Fed officials uncertain about how Warsh defines the limits of independence. Several former officials told the outlet his framework is difficult to interpret, with one warning, “If followed to its logical conclusion, the Fed could lose control of its balance sheet.”

The debate is unfolding against a complex economic backdrop shaped by geopolitical tensions. The war in Iran has driven oil prices higher and complicated the Fed’s efforts to balance inflation and growth, while also contributing to the central bank’s decision to hold interest rates steady at recent meetings, according to a report by Politico.

Recent reporting has also highlighted divisions within the Fed. Policymakers kept rates unchanged in what was likely Jerome Powell’s final meeting as chair last week, with multiple officials dissenting, an indication of growing disagreement over the path forward, according to IBT. Powell is set to continue as a governor of the Fed even if he stops chairing it, a move that could shape internal dynamics at the central bank.

Warsh has also proposed a new “Fed/Treasury accord” that could influence how the central bank manages its balance sheet, though details remain limited. Former Richmond Fed President Jeffrey Lacker said such an agreement could be beneficial in narrowing the Fed’s focus but warned of risks. “I can also imagine a less constructive agreement that lets the Treasury use the Fed’s balance sheet to bypass Congress, perpetuating bad practices and compromising the Fed’s independence,” Lacker said, according to CNBC.