Meet America's new Federal Reserve chief : Kevin Warsh

Picture Credit: by CNN

He inherited a poisoned chalice, and he accepted it anyway. Kevin Warsh was confirmed by the US Senate on Wednesday as the 17th chair of the Federal Reserve, stepping into one of the most powerful economic posts on earth at one of its most turbulent moments.

The confirmation vote was 54-45, the most partisan in Fed history, with only a single Democrat, Pennsylvania's John Fetterman, crossing the aisle. The near-perfect party-line split tells you everything about what Warsh is walking into: a central bank under siege, an economy rattled by war, and a president who has made no secret of his desire to dictate interest rate policy.

Warsh succeeds Jerome Powell, whose eight-year tenure was defined by crises, the pandemic shock, the worst inflation in a generation, and a bitter, public feud with the White House. Powell fought hard to defend the Fed's independence. Whether Warsh will do the same is the question keeping economists up at night.

He is widely seen as more aligned with Trump, who has long demanded rate cuts. But the timing is brutal. Inflation jumped to a three-year high in April, now outpacing wage growth, as the Iran war continues to drive energy prices skyward. Markets no longer expect cuts this year, and may even be pricing in a hike. Trump, who joked earlier this year that he would sue Warsh if rates aren't cut, may find his chosen man boxed in by the very economy he helped disrupt.

Warsh has signalled he will move quickly to reshape the institution, shrinking the Fed's $6.7 trillion balance sheet, cutting policy meetings from eight to as few as four per year, and reducing the size of its Washington workforce.

His first meeting as chair is set for June 16-17. The world will be watching every word.