The U.S. Senate is expected to confirm Kevin Warsh as the next chair of the Federal Reserve this week, according to The Guardian. Warsh would replace outgoing Fed Chair Jerome Powell at a time when President Donald Trump has continued criticizing the central bank for keeping interest rates elevated.
Democrats have criticized Warsh as too closely aligned with Trump after the nominee publicly backed the president's view that rates are too high. In Senate testimony, Warsh said he would act independently, though Powell recently warned that political pressure on the Fed was "battering the institution."
Trump's conflict with Powell escalated in recent months after the administration backed a criminal investigation into renovation costs at the Fed's headquarters. Trump also joked last month that he would "cut the Oval [Office] in half" to give Warsh workspace inside the White House.
Warsh Signals Broader Fed Overhaul
Warsh has already signaled he may pursue major changes to how the Federal Reserve operates.
Warsh wants to replace core PCE, the Fed's preferred inflation gauge for nearly two decades, with trimmed-mean and median PCE measures produced by regional Fed banks.
Under the current core PCE measure, inflation stood at 3.0% in February. Under Warsh's preferred trimmed-mean measure, inflation would appear closer to the Fed's 2% target at 2.3%.
Warsh has also criticized forward guidance, questioned the Fed's communication framework and called for faster balance-sheet reductions.
Markets Watch Credibility Risks
Some investors worry a more dovish Fed under Warsh could damage the central bank's credibility if inflation remains elevated.
Ray Dalio warned that cutting rates during stagflationary conditions could undermine confidence in the Fed.
Financial disclosures also showed Warsh holds stakes tied to SpaceX, Polymarket and crypto-related assets linked to Bitcoin (CRYPTO: BTC) and Solana (CRYPTO: SOL)
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