Senate approves Warsh to be next Federal Reserve chair as inflation intensifies

The vote was 54-45 in the most-partisan-ever U.S. Senate confirmation of a Fed chair. A single Democrat, John Fetterman of Pennsylvania, voted with the Republican majority.

A day earlier, the Republican-majority body confirmed Warsh to a 14-year term on the Fed's seven-member board of governors.

His swearing-in to both positions awaits final White House signatures on paperwork sent by the Senate. The White House did not respond to questions about when Trump would complete the final paperwork or the timing of his swearing in.

Warsh will take the leadership baton from Fed Chair Jerome Powell, whose term ends Friday but who will remain on the Fed board. Stephen Miran, currently the central bank's biggest advocate of rate cuts, will vacate his spot on the board to make room for Warsh.

Expected to be in place to chair the Fed's next meeting June 16 to 17, Warsh joins a central bank whose policymakers are engaged in a vigorous debate on the direction of interest rates.

Several central bankers argued that the Fed should consider rate hikes, concerned that inflation is broadening even beyond the impact of the Trump administration's tariffs and the spike in oil prices from the Iran war.

An index of producer prices, a key component of overall inflation, jumped 6% in April from a year earlier, the Labor Department reported Wednesday. That's the fastest pace since December 2022, when the Fed battled a 40-year record surge in prices with sharp rate hikes.

Analysts expect the Personal Consumption Expenditures price index rose 3.8% last month, further from the Fed's target of 2%.

Warsh may have to navigate a divided group of policymakers with growing support for more hawkish language indicating that a rate increase is as likely as a rate cut in coming months. At least five of the Fed's 19 policymakers said they wanted that change as of April.

Also in June, Fed policymakers are scheduled to release fresh rate-path forecasts. March's projections for a single rate cut this year look increasingly stale as the unemployment rate hovers around 4.3%, indicating the labor market may not need the support of a rate cut. However, inflation continued to gain steam.

Financial markets now expect no change to the Fed's 3.5% to 3.75% policy rate target this year, with a rate hike as soon as January.

Warsh is no stranger to discord within the Fed. As a Fed board member during Ben Bernanke's tenure as chair, he expressed reservations about policy, though he left the board in 2011 without ever casting a dissenting vote.

At his confirmation hearing, he told senators he welcomes a "family fight" at the Fed as policymakers hammer out the right monetary policy response to economic conditions.

Unlike during Warsh's first stint at the Fed, the current president badgered the central bank for rate cuts. Trump also undertook what Powell calls a "series of legal attacks" on the central bank, including an attempt to fire Fed board member Lisa Cook last year. Trump's Department of Justice also launched a criminal investigation of Powell, which it dropped for now but left the door open to reviving.

Powell and others said those attacks threaten the Fed's ability to set interest rates according to economic fundamentals. Powell opted to buck tradition and stay on the Fed board beyond the end of his chair term, at least until the DOJ probe is definitively closed.

Warsh also faces a different inflation backdrop than he did the last time he was a Fed board member. Then, inflation mostly ran below the Fed's 2% target, yet Warsh argued that policymakers should tighten financial conditions with a smaller balance sheet.

Trump expects Warsh to advocate for lower rates, and Warsh expressed support for Trump's view. Still, he told senators that he had not made any promises.