Donald Trump will personally preside over the swearing-in ceremony for the new Federal Reserve Chairman, Warsh, an arrangement that breaks recent convention and once again spotlights the 70-year power struggle between the White House and the Federal Reserve. History shows that every Fed Chairman has sought balance between political pressure and policy independence, and Warsh is no exception—but the situation he faces is far more complex than outsiders imagine.
According to a report citing White House officials, Trump will personally preside over Warsh's swearing-in ceremony at the White House this Friday. This move breaks recent norms—inauguration ceremonies are typically held within the Federal Reserve, with the President rarely attending. The last swearing-in ceremony for a Fed Chairman held at the White House dates back to Alan Greenspan's inauguration in 1987, nearly four decades ago.
A research report points out that while Warsh is not a "dovish Chairman," it cannot be certain there will be no rate cuts this year—the relationship between the Fed Chairman and the U.S. President is not static but evolves over time.
However, Warsh is not inheriting a fully unified Federal Reserve. At the late April FOMC meeting, three governors cast the most unusual dissenting votes since October 1992—they opposed not the rate cuts themselves but even the suggestion of them. This means Warsh inherits a central bank already showing internal fractures, while Trump's expectation of him is precisely to cut rates.
The White House Inauguration: A Politically Charged Arrangement The arrangement of this inauguration ceremony itself sends a strong signal. When Powell was inaugurated in 2018, the ceremony was held within the Fed, and Trump did not attend. The most recent sitting President to attend an inauguration was George W. Bush, who attended Ben Bernanke's swearing-in ceremony in 2006. Trump's personal involvement directly highlights his close attention to this Fed appointment.
On the procedural level, this transition process has also been unusually lengthy. Warsh was confirmed by the Senate last week, receiving a four-year term. Powell's term as Chairman ended last weekend, but he stated he would remain on the Fed Board as a Governor, with that term lasting until January 2028. Warsh also agreed to divest some personal investments before formally taking office, which somewhat delayed the transition. During the interim, Fed Vice Chair Philip Jefferson represented the central bank at the G7 finance ministers and central bank governors meeting in Paris this Monday.
A 70-Year History of Struggle: From Martin to Powell A report systematically reviews the relationship history between successive Fed Chairmen and Presidents since 1960, outlining a clear evolutionary path.
William Martin, lacking institutional defenses, could only rely on personal credibility to maintain independence. After taking office, he refused to act as the Treasury's agent, shifted the Fed's decision-making center from New York to Washington, and expanded decision-making authority to the entire FOMC. When Truman saw him on a New York street, he simply said "Traitor" and walked away.
Arthur Burns's failure stemmed from his own disbelief that monetary policy could end inflation, which opened the door to Nixon's political pressure. Nixon pressured through private letters, intervened in board personnel composition, and even sent senior advisors to directly lecture Fed staff. Burns formally preserved institutional independence but made significant compromises on substantive policy direction, ultimately destroying the Fed's credibility.
William Miller represented the most direct model of political alignment—deliberately chosen to align with Carter's political goals, he was ultimately undermined by external crises. By summer 1979, inflation had become Carter's biggest political crisis, and Miller was moved to Treasury Secretary to make way for nominating a true inflation hawk.
Paul Volcker elevated independence from "personal credibility defense" to a triple moat of "personal credibility + institutional framework + market credibility." Carter, knowing that appointing Volcker would come at a political cost, still made the choice—as his policy advisor Eizenstat said, it "ultimately squeezed him out of a second term while squeezing out inflation at the cost of high unemployment." Although Reagan "ordered" Volcker not to raise rates before the 1984 election and launched an "FOMC ambush" through appointed governors in 1986, neither ultimately changed the policy course.
Alan Greenspan used technocratic rhetoric to push conflicts below the surface, clashing fiercely with George H.W. Bush, reaching a "Washington peace" with Clinton, but crossed the line under George W. Bush to support tax cuts, becoming the first Fed Chairman to actively "invade" fiscal policy.
Ben Bernanke embodied the model of natural convergence between the White House and the Fed during crisis situations, with his main pressure coming from Congress and within the Fed, not the White House. Janet Yellen responded to Trump's attacks with "non-political language + strict self-restraint," becoming the first Fed Chairman replaced by a new President since Carter did not reappoint Burns.
Jerome Powell faced the most severe presidential pressure since Burns. During Trump's first term, under combined external political pressure and internal economic judgment, Powell cut rates three times consecutively in 2019 and halted balance sheet reduction. In the second term, facing Trump's tactics like investigations over Fed headquarters renovation cost overruns and hints of dismissal, Powell's response significantly hardened, elevating Fed independence defense to a historically new level of legalization, documentation, and publicization. In his final meeting as Chairman, the FOMC maintained rates unchanged with an unusual 8-4 split.
Warsh's Dilemma: A New Chairman Facing Challenges Both Internally and Externally The situation Warsh inherits is historically rare—he faces simultaneous pressure from the White House to cut rates and hawkish resistance from within the FOMC.
Warsh is not a traditional dove. Appointed by George W. Bush as a Fed Governor in 2006 at age 35, he was one of the youngest governors in Fed history. After QE2 officially launched in 2010, he became the only FOMC governor to publicly question the expansion direction, resigning early in 2011, widely interpreted by markets as a silent protest against excessive Fed easing. His background from Morgan Stanley investment banking, as White House NEC Executive Secretary, and close ties to Republican core circles suggest his expected policy independence is no lower than that of historically similar Chairmen.
A report outlines four key points from Warsh's recent speeches and Q&A sessions:
First, his definition of Fed independence is more nuanced than his predecessors', believing that politicians commenting on monetary policy does not affect Fed independence, which is both a desensitization to Trump's pressure and leaves room to defend policy independence without public conflict; Second, he holds negative views on forward guidance, and markets may need to adapt to a more "silent" Fed; Third, he places great importance on inflation, directly refuting Trump's view that rising oil prices constitute "fake inflation"; Fourth, he believes productivity gains from artificial intelligence will make rate cuts possible, sharing a similar logical structure to Greenspan's insights during the 1990s productivity boom.
Rate Cuts and Balance Sheet Reduction: Direction Certain, Pace Cautious The report suggests that monetary policy under Warsh will likely feature "certain direction but cautious pace."
Regarding the pace of rate cuts, inflation has been above target for five consecutive years, making stabilizing inflation expectations a higher priority. Warsh's emphasis on inflation, especially his denial of "fake inflation theory," indicates he will not easily cut rates before inflation clearly returns to the target range. In the short term, demand growth from data center investments may further offset room for rate cuts, slowing the pace due to data constraints. The report notes that if Trump shows Warsh more respect, rate cuts might come earlier; if Trump continues high-intensity pressure, to defend Fed independence, Warsh would likely lean toward later cuts.
Regarding the pace of balance sheet reduction, Warsh believes the expanded balance sheet effectively extends the Fed's monetary policy boundary into the fiscal domain, making reduction logically necessary. But he also acknowledges that it took the Fed 18 years to accumulate the balance sheet to its current size, and reduction is not an overnight task, expected to proceed slowly and methodically. Furthermore, initiating balance sheet reduction without rate cuts could almost be seen as proactively picking a fight with the White House—this also dictates that reduction will proceed at a pace avoiding direct confrontation before the rate-cutting cycle begins.
The report's core conclusion is: Replicating Greenspan-style management and returning to a scarce reserves regime first requires winning support within the Fed; rushing would be counterproductive. Judging Warsh's future policy path should not rely solely on his personal stance or current relationship with the White House but return to macro trends—inflation levels, growth resilience, oil price direction, financial condition tightness—to deduce his most likely choices under different scenarios.
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