The Economy, Not Kevin Warsh, Will Drive Fed Policy

Kevin Warsh became chair of the Federal Reserve on May 15 after Senate confirmation earlier this week, succeeding Jerome Powell at a politically sensitive moment for the central bank. A former Fed governor, Warsh brings stronger market credibility than some other candidates considered for the role, but his ties to President Donald Trump have raised questions about the Fed’s independence.

Those concerns have grown in Trump’s second term amid repeated calls for lower rates and efforts to remove Fed officials. Even so, we see limited risk of a meaningful erosion in Fed independence. Legal and institutional safeguards still constrain political influence, and policy should remain driven mainly by inflation, labor market, and growth data. Continuity on the current board, whose members have a long record of voting independently, further limits tail risk, especially with Powell expected to temporarily remain a governor after his term as chair ends.

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