(WASHINGTON) — President Donald Trump’s selection to chair the Federal Reserve, Kevin Warsh, will testify in a Senate confirmation hearing on Tuesday as his nomination faces bipartisan opposition centered on a federal criminal investigation into the central bank’s current leader.
The probe into Fed Chair Jerome Powell, which focuses on alleged false testimony to Congress about an office renovation, threatens to derail or delay Warsh’s nomination.
Powell, who was appointed by Trump in 2017, has rebuked the probe as a politically motivated effort to influence interest-rate policy.
Warsh, a former Fed official, will likely face scrutiny from some lawmakers eager for assurance that he will set interest rates based on economic conditions, even if it puts him out of step with Trump’s preference for low interest rates.
Sen. Thom Tillis, R-N.C., a potentially decisive vote on the committee, says he will not move to advance the nomination until the Department of Justice resolves its unprecedented investigation into Fed Chair Jerome Powell.
Powell’s term as Fed chair ends on May 15, but he said last month he would stay in the position until Warsh is confirmed. For his part, Trump told Fox Business last week he would fire Powell if the current Fed chair attempts to remain in office past the end of his term.
Sen. Elizabeth Warren, D-Mass., the top Democrat on the committee, voiced concern in a statement last week about what she considers Warsh’s perceived lack of independence, saying he may end up being “Donald Trump’s sock puppet.”
By contrast, Sen. Tim Scott, R-S.C., the chairman of the Senate Banking Committee, has dismissed such worries in a post on X last week.
Under Warsh, Scott said, the Fed will “be focused solely on strengthening the American economy.”
Warsh, who previously worked on Wall Street and in the George W. Bush administration, brings experience in finance and policymaking.
He is currently a fellow at a conservative think tank called the Hoover Institution, which is based at Stanford University. He also works as a partner at the Duquesne Family Office, an investment firm founded by billionaire and former hedge fund manager Stanley Druckenmiller.
In 2006, Bush appointed Warsh to serve on the Fed’s Board of Governors, a top policymaking body that helps set the level of interest rates, where he served until 2011. His tenure overlapped with the 2008 financial crisis, during which he helped manage the central bank’s response under then-Chair Ben Bernanke.
The nomination of Warsh arrives at a delicate moment for the Fed, as it grapples with a challenging combination of elevated inflation and sluggish hiring. An interest-rate hike could help ease inflation but risks a further cooldown of the labor market, while a rate cut may boost hiring but threatens higher inflation.
During his term as a Fed governor in the late 2000s and early 2010s, Warsh gained a reputation as an interest-rate “hawk,” meaning he generally preferred higher interest rates as a means of ensuring low and stable inflation.
In recent months, however, Warsh has voiced support for lower interest rates, rebuking the Fed’s concern about inflation risk posed by a flurry of new tariffs issued last year.
Those remarks came before the U.S.-Israeli war with Iran, however, which sent inflation soaring last month.
The rapid acceleration of price increases could complicate interest rate policy at the Fed, which may be reluctant to lower borrowing costs as inflation climbs.
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