The Senate Banking Committee on Wednesday approved former Fed Governor Kevin Warsh to take the reins at the central bank.
The nomination was approved by the committee on a party line vote, with 13 Republicans voting to advance Warsh and 11 Democrats voting to reject the nomination. Warsh’s nomination now goes to the full Senate for a confirmation vote.
President Donald Trump nominated Warsh to take over when current chairman Jerome Powell’s term expires in May. The confirmation process was held up for several weeks by Senator Thom Tillis, who said he would not vote to advance the nomination until a Justice Department investigation of Powell and the Fed was dropped. Last week, U.S. Attorney Jeanine Pirro said her office had closed the investigation, which was focused on cost overruns in the renovation of the Fed’s headquarters.
Warsh will be Trump’s second appointment to the chairmanship of the Fed. Trump elevated Powell during his first term but the relationship between the president and the Fed chair quickly deteriorated when Powell raised rates several times, slowing economic growth despite very low inflation. Trump frequently and publicly chastised Powell’s monetary policy but never sought to interfere with the Fed’s independent policymaking.
Powell was widely criticized after inflation rose to the worst levels in decades during the early years of the Biden administration. The Fed was seen as falling behind the curve, under the mistaken assumption that post-pandemic inflation would quickly fade. Six years after inflation began rising, the Fed has still not brought inflation down to its two percent target.
While Powell’s chairmanship ends in May, he can stay on as governor for two more years. That would be highly unusual. Most Fed chairman step down from the Fed altogether when their successor is confirmed. Powell has not indicated whether he will cling to the position once he is no longer chair.
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