The primary political obstacle to Kevin Warsh becoming Chairman of the Federal Reserve has been removed, with his confirmation process expected to advance rapidly this week.
A member of the U.S. Senate Banking Committee, Republican Senator Thom Tillis of North Carolina, announced on Sunday that he will withdraw his objection to Warsh's nomination, clearing the way for a committee vote scheduled for April 29. This decision came after the Department of Justice announced it was dropping a criminal investigation into current Chair Jerome Powell. Tillis stated this action alleviated his core concern about threats to the Federal Reserve's independence.
Warsh enjoys broad support among Republican senators. The Senate Banking Committee has scheduled the nomination vote for April 29. If the committee approves the nomination, it will proceed to a full Senate vote. The timing for his final confirmation is widely expected to align closely with the expiration of Powell's term as Chair on May 15.
Should Warsh be confirmed, he is expected to initiate significant reforms. During his hearing last week, he called for abolishing the "dot plot" and re-evaluating the forward guidance mechanism. This suggests the core framework that has underpinned global asset pricing for the past 15 years could face fundamental changes, potentially leading to a comprehensive reassessment of pricing logic across stock, bond, and currency markets.
Tillis, who held a pivotal vote on the committee, had previously committed to blocking Warsh's nomination as long as Powell was under federal investigation. He characterized the criminal probe as an attack on the Fed's independence, suggesting it was intended to force Powell out early.
On Friday, federal prosecutor Jeanine Pirro announced on social media that she would drop the criminal investigation into overspending on Fed building renovations and Powell's congressional testimony, transferring the matter to the Fed's Office of Inspector General for review. Following this, Tillis communicated with the Justice Department and received assurances that the criminal case against Powell and the Fed was "completely and definitively closed."
"That was my initial issue, because I felt that a prosecutor in Washington thought this could be used as leverage to get Powell to leave early," Tillis said in an interview. He stated that after receiving the Justice Department's assurance, he was "prepared to move forward with Mr. Warsh's confirmation process." In his Sunday statement, Tillis described Warsh as an "outstanding nominee" and said it was "time for the Fed to move beyond this distraction and refocus fully on its mission."
Despite the accelerated confirmation process, uncertainty surrounding Powell's status has not entirely dissipated. While his term as Chair ends on May 15, his term as a member of the Federal Reserve Board continues until 2028. The Justice Department's partial closure of the case does not guarantee his departure from the Board.
When questioned by reporters on Saturday, former President Trump indicated that with Pirro dropping the criminal investigation, Warsh's confirmation path "should be smooth, I would think." However, he declined to give Powell a "full pass," citing the ongoing Inspector General's review of the renovation costs, stating, "I have an obligation to find out" the reasons behind the overspending.
This lingering uncertainty means political pressure could persist, which might ironically provide a reason for Powell to remain on the Board even if Warsh is confirmed by the Senate.
Warsh's policy stance may be of greater significance to markets than his confirmation itself. During his April 21 hearing before the Senate Banking Committee, he explicitly called for abolishing the "dot plot"—the quarterly chart showing the interest rate projections of the 19 FOMC members—and criticized the core PCE index as a "rough estimate." He characterized the high inflation of 2021-2022 as a policy failure rather than an external shock. He also declined to commit to maintaining the regular press conference after every FOMC meeting, stating that "the pursuit of truth is more important than repetition." He further hinted at potentially reducing the number of annual meetings but did not provide specifics.
Warsh's criticisms target the very mechanism of forward guidance—the framework through which the Fed communicates its policy intentions to markets in advance. This system, gradually built by Ben Bernanke after 2008, includes calendar-based commitments, conditional commitments, minutely parsed statements, and the dot plot. Over the past 15 years, it has become an implicit foundation for global asset pricing.
If Warsh implements his proposed changes, the core tool markets use to build interest rate expectations would be removed. The certainty premium would diminish, forcing a systemic reassessment of pricing models in equity, bond, and foreign exchange markets.
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