Kevin Warsh was sworn in as Federal Reserve chair at a White House ceremony Friday morning, facing surging inflation that is weighing on Americans fueled by the war in Iran.
Warsh was sworn in by Supreme Court Justice Clarence Thomas in a ceremony attended by Treasury Secretary Scott Bessent, Federal Housing Finance Agency Director Bill Pulte, National Economic Council Director Kevin Hassett and Justice Brett M. Kavanaugh, among others.
Warsh, 56, inherits a set of challenges that would test any new chair, including a president who has demanded dramatically lower interest rates, a board increasingly divided on how to navigate inflation and financial markets that are betting the central bank’s next move may need to be a hike.
He replaces Jerome H. Powell, whose term expired last week but who remains on the Fed’s powerful board that helps run monetary policy. Powell did not attend the ceremony.
The setting of the swearing-in at the White House was a departure from recent tradition, with such events having typically taken place at the Fed without the president in attendance.
“I want Kevin to be totally independent. I want him to be independent and just do a great job. Don’t look at me. Don’t look at anybody. Just do you own thing. Do a great job. Okay?” President Donald Trump said during the ceremony. “We want to stop inflation, but we don’t want to stop greatness.”
Warsh is a former Morgan Stanley banker who served as a Fed governor during the 2008 financial crisis, acting as a liaison between the central bank and Wall Street. He was passed over for the top job once before, when Trump chose Powell in 2017, a decision the president quickly came to regret.
His ascension to the chairmanship caps an unusually aggressive campaign by Trump to reshape the central bank in his image. Over the past year, the president threatened to fire Powell before his term expired, moved to oust Fed governor Lisa Cook in a legally contested action, and encouraged a Justice Department investigation into Powell over the cost of the Fed’s headquarters renovation — a probe the department ultimately set aside to ensure Warsh’s confirmation advanced through the Senate.
Warsh also inherits an unusual institutional dynamic: Powell, rather than departing the Fed upon Warsh’s confirmation, is remaining on the Fed’s seven-member board as a governor, a move no outgoing chair has made in nearly 80 years. His term runs through early 2028, depriving the White House of a seat on the board and giving Fed officials skeptical of Warsh’s agenda of “regime change” a credible focal point to organize around.
Unlike Powell, however, Warsh enters the job with a rapport with Trump, a relationship that could shield him from the kind of public attacks that dogged his predecessor and complicated the Fed’s ability to operate independently.
The Fed sets the benchmark interest rate that ripples through the financial system, shaping what millions of Americans pay for mortgages, auto loans and other borrowing.
Inflation has run above the central bank’s 2 percent target for more than five years and is now moving in the wrong direction, pushed higher by rising energy costs tied to the war in Iran — complicating any decision to cut rates. The Fed itself projects inflation may not return to target for two more years, a stretch that risks eroding public confidence that longer-term prices will stay anchored.
“When he was in the process of being nominated and confirmed, there was an expectation that the Fed would continue cutting,” said Michael Strain, a director of economic policy at the right-leaning American Enterprise Institute. “Events have changed that expectation. And if developments in the oil market bleed into inflation expectations, you could see real pressure on Chairman Warsh from markets and from other members of the FOMC to hike,” referring to the central bank committee that sets the price of money.
That environment presents Warsh with a dilemma the Fed has no clean answer to. Raising interest rates to combat inflation risks deepening any economic slowdown caused by the war. Cutting them to cushion the economy risks pushing prices higher. And simply holding rates steady carries its own cost: With inflation running hot, unchanged rates mean looser policy in real terms, giving households and businesses less reason to pull back on spending and potentially adding fuel to inflation.
Warsh has been broadly critical of the Fed’s recent leadership, arguing that the central bank overreached during and after the coronavirus pandemic and invited the inflation surge that followed. “Inflation comes from bad policy, not bad luck,” he said in a forthcoming book of interviews about the Fed.
While Warsh long held a reputation as an inflation-focused hawk, he has more recently argued for faster rate cuts. He also wants, over time, to dramatically shrink the Fed’s $6.7 trillion balance sheet, which he says amounts to fiscal policy in disguise — financing government spending in a way that should be left to Congress and undermining the Fed’s claim to political independence.
During his confirmation hearing, Warsh pledged independence from the White House. “The president never asked me to commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed,” he said. “He didn’t ask for it, he didn’t demand it, he didn’t require it, and nor would I have ever done so.”
But Warsh declined to put much distance between himself and the president on other fronts. He would not say whether Joe Biden won the 2020 presidential election and sidestepped questions about whether tariffs had contributed to inflation.
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