The Federal Reserve has a new leader, but the policy maneuvering behind the transfer of power has quietly begun. On Friday local time, Kevin Warsh was officially sworn in as the head of the Federal Reserve at the White House, with his four-year term set to expire on May 21, 2030. At the ceremony, Trump expressed support for the central bank's independence but quickly shifted tone, publicly outlining his economic vision for the new chair: economic prosperity should not be constrained, and strong growth does not trigger inflation. Warsh then delivered brief remarks, calling it a "lifetime honor to be recalled to public service." He stated, "To fulfill this mission, I will lead a reform-oriented Federal Reserve, learning from both past successes and mistakes, breaking free from rigid frameworks and models while upholding clear standards of integrity and performance." Warsh emphasized that the Fed must fulfill its mandate of controlling inflation and achieving full employment with "independence, clear judgment, and firm resolve." He added that the Fed's mission is to "maintain price stability and achieve maximum employment."
This comes at a critical juncture for monetary policy and the U.S. economy. His broad criticism of current Fed officials, his approach to interest rate cuts, and his relationship with President Trump helped him stand out among other contenders for the Fed leadership. Meanwhile, inflation remains elevated and could rise further as the U.S. economy faces multiple shocks, including the war between the U.S., Israel, and Iran pushing oil prices above $100 per barrel, high import tariffs, and rising utility and other costs due to the proliferation of artificial intelligence.
**Trump's Contradictory Hints, Warsh Aims to Be Greenspan, Not Bernanke**
On Friday, Warsh, dressed in a dark suit and tie, was sworn in by U.S. Supreme Court Justice Clarence Thomas, accompanied by his wife Jane Lauder, an heir to the Estée Lauder fortune. The White House gathering included several high-ranking cabinet officials, such as U.S. Treasury Secretary Besant, and many of Warsh's old friends, including former U.S. Secretary of State Condoleezza Rice.
At the ceremony, Trump first endorsed the Fed's independence, expressing hope that Warsh would be "completely independent" and "not look to me, not look to anyone." However, shortly after this endorsement, Trump quickly moved to substance. He stated, "When the economy is booming, that's a good thing. We don't need to over-intervene; let it boom." He also directly clarified his stance: "We want to curb inflation, but we don't want to curb greatness." These two seemingly contradictory statements form a complete logic: acknowledging independence while laying the groundwork for a low-interest-rate policy.
In his subsequent brief remarks, Warsh rarely touched on policy details but deliberately invoked former Chair Alan Greenspan as a reference, stating, "I will carry out this duty with the vigor and sense of mission of Chairman Greenspan." Notably, Warsh served all five of his years at the Fed under former Chair Ben Bernanke but made no mention of him. This deliberate omission aligns with Warsh's previously expressed reform stance, advocating to return the Fed to a leaner, lower-profile institution akin to the pre-Bernanke era. Citing Greenspan over Bernanke is both a stylistic statement and a policy metaphor.
**Committee System: The Real Challenge Warsh Faces**
The Fed's interest rate decisions are made by vote within the monetary policy committee; the chair does not have veto power. Warsh now needs to persuade the other 11 voting members, most of whom were not nominated by Trump and whom Warsh cannot replace. Trump offered an optimistic forecast on this, stating that other policymakers "will make their own decisions" but "will always listen to Warsh," and even members with "different views" would be inclined to follow Warsh's direction "out of respect."
However, the practical difficulty cannot be ignored. An increasing number of officials within the Fed have expressed concerns about rising prices. If Warsh aims to promote a low-interest-rate path, he must win the committee's agreement on policy logic, not rely on the aura of the chairmanship. On the same Friday, Fed Governor Waller delivered hawkish remarks, clearly stating that inflation is the "driving force" for future policy decisions and that the odds of future rate hikes and cuts are "fifty-fifty." This statement directly fueled a sharp increase in rate hike expectations.
**Inflation Pressure and a Dilemma: Policy Tests Await from Day One**
At 56, Warsh won Trump's support during a year-long public "audition" among top candidates. During this period, the new chair set ambitious reform goals for the Fed—he believes the Fed had begun to lose its way by 2011 when he resigned as a governor in opposition to the Fed's bond purchases. However, now, his first few months in office may be consumed by a more pressing dilemma: whether to raise rates to prevent inflation from further deviating from the Fed's 2% target or risk his credibility as an inflation fighter from the outset.
As the 11th Chair of the Federal Reserve, Warsh will have to look both ways from the very beginning of his term: on one hand, global bond markets have already begun pushing rates higher, indicating growing inflation concerns; on another, colleagues like Waller are already setting expectations that rate hikes may be necessary; furthermore, there is Trump, who has consistently viewed rate hikes as political attacks on his economic plans and has sharply criticized Powell for not lowering borrowing costs.
The Fed's next meeting is scheduled for June 16-17, when policymakers will vote on interest rates and a new policy statement and submit new economic forecasts.
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