Kevin Warsh sworn in as Fed chair, but Trump’s rate cuts look increasingly unlikely

Kevin Warsh was sworn in Friday as the new chair of the Federal Reserve, the world’s most influential central bank.

Warsh’s formal assumption of the role comes after the Senate confirmed him to lead the Fed in a 54-45 party-line vote on May 13. The only Democrat to cross the aisle was Sen. John Fetterman of Pennsylvania.

The optics of Friday’s event, in the White House’s famed East Room and with lengthy remarks by President Donald Trump, underscore just how tightly the president would like to control the Fed and its interest-rate-setting body.

“I want Kevin to be totally independent and just do a great job,” Trump said before Warsh was sworn in by Supreme Court Justice Clarence Thomas.

Trump added that he wants Warsh to do his “own thing.”

Warsh said he believes that living standards can be raised for Americans and that “the Fed has something to do with it.”

“I will lead a reform-oriented Federal Reserve,” Warsh added about the institution he said he cherishes.

The last Fed chair to be sworn in at the White House was Alan Greenspan in 1987. The two most recent chairs, Janet Yellen and Jerome Powell, were both sworn in by fellow board members in low-key ceremonies at the bank’s headquarters.

Warsh takes the helm of the Federal Reserve at a challenging moment for the central bank.

Inflation is on the rise, the labor market is under pressure and a consensus is forming among economists that interest rates should not be lowered in the near future.

On Friday, Fed governor Christopher Waller — a Trump appointee — said, “I can no longer rule out rate hikes further down the road if inflation does not abate soon.”

Waller added that he thinks the next statement from the Fed’s rate-setting committee should “make it clear that a rate cut is no more likely in the future than a rate increase.”

That consensus runs directly counter to Trump’s longtime goal of bringing about dramatically lower benchmark borrowing rates — by any means necessary.

Trump’s pursuit of those lower rates has spanned dozens, if not hundreds, of public insults and critiques directed at Powell, who was the president’s own pick to chair the bank nearly a decade ago.

The Fed is also awaiting a Supreme Court decision over Trump’s attempt to fire governor Lisa Cook. Powell personally attended the oral arguments in the case in a show of support for the central bank’s hallmark independence.

Trump, however, has remained fixated on lower rates.

Before choosing Warsh, a Fed governor from 2006 until 2011, to lead the Fed, he made it clear what mold he wanted for its next leader.

In December, Trump said that person would be “someone who believes in lower interest rates, by a lot.”

In February, speaking to “NBC Nightly News” anchor Tom Llamas in the Oval Office, Trump said Warsh “would not have gotten the job” if he didn’t want to cut rates.

Trump also said he believes the central bank is “in theory” an “independent body” and should follow his suggestions on monetary policy because, in his words, he knows the economy “better than almost anybody.”

But, since then, the economy has been on a roller-coaster ride.

On Feb. 28, Trump launched a war with Iran, rattling global markets as the critical Strait of Hormuz effectively ground to a halt, shutting off more than 20% of the world’s oil supplies.

In the months since, the average price of gasoline has jumped more than 50%, inflation overall has surged to 3.8% and government bond yields around the world have soared as investors worry about how much more inflation there is to come.

On CNBC in mid-April, Treasury Secretary Scott Bessent said he “understands” if the Fed now needs to wait to cut rates “for some clarity.”

Since his nomination, Warsh has repeatedly pledged to act independently, including during his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee in April.

Still, few imagined that Warsh would face as much inflationary pressure right from the start as he does now.

Even Trump appears to be changing his tune slightly on Warsh and interest rates.

“I’m going to let him do what he wants to do,” he said when asked by the Washington Examiner if he thinks Warsh will still cut rates. “He’s a very talented guy, he’s going to be fine, he’s going to do a good job.”

Rates are not the only contentious item on Warsh’s agenda. He has also indicated that he wants to bring “regime change” to the central bank, changing how the Fed communicates, shrinking its balance sheet and reforming its forecasting models.

In just three weeks, Warsh will helm his first Federal Open Market Committee meeting as its chair, where officials will debate what to do with interest rates.