Vosh: The Federal Reserve is reform-oriented; the coming years will see unparalleled prosperity

Kevin Warsh was sworn in as the head of the Federal Reserve on Friday, at a critical moment for monetary policy and the U.S. economy. His broad criticism of current Fed officials, his strategy of cutting rates, and his relationship with President Donald Trump have helped him stand out over other contenders in the race to lead the Fed.

Warsh, wearing a dark suit and tie, was sworn in by Supreme Court Justice Clarence Thomas, with his wife—Jane Lauder, the heiress of the Estée Lauder fortune—by his side, following Trump’s lengthy introduction. The East Room of the White House was packed with senior cabinet officials, including U.S. Treasury Secretary Scott Bessent, as well as several of Warsh’s longtime friends, such as former U.S. Secretary of State Condoleezza Rice.

After consistently criticizing former Fed Chair Jerome Powell, Trump said that Warsh would receive “the full support of my administration.”

At the swearing-in ceremony, Trump said:

I expect Warsh to be a great Fed Chair. Warsh will lead the Fed starting today—no one is more suited to lead the Fed than Warsh. Warsh’s respect for the Federal Reserve is the deepest.

I want Kevin to be completely independent. I want him to act independently and do his job. Don’t look at me—don’t look at anyone else—just go ahead and do it, and do your job well.

Kevin will defend the integrity of the Fed. They will make their own decisions. I hope they do well, but they will listen to Kevin’s advice throughout.

Even though Trump said he hopes Warsh remains independent, he also cleverly encouraged Warsh not to obstruct during a period of rapid economic expansion:

Unlike some of his former predecessors, Kevin understands that when the economy is thriving, that’s a good thing. We don’t have to overreact—just let it thrive. We want it to thrive.

The Federal Reserve is a pillar of the global financial system.

Warsh then delivered a brief speech, calling it “the lifelong honor of being called back to public service.” He said: “To fulfill this mission, I will lead a reform-oriented Federal Reserve, learning from past successes and failures, shedding rigid frameworks and models while also upholding clear standards of integrity and performance.”

Warsh emphasized that the Federal Reserve should carry out its responsibilities to control inflation and achieve maximum employment with “independence, clear judgment, and a firm stance.” He also said that the Fed’s mission is “to maintain price stability and achieve maximum employment.”

Waiting for Warsh is an unfolding wave of artificial intelligence technology. Fed officials say this wave is reshaping the economy, with potentially far-reaching effects on workers, businesses, and consumers, though Warsh and his colleagues will find it difficult to assess in real time.

Meanwhile, inflation remains stubbornly high and could rise further, as the U.S. economy is dealing with multiple shocks, including the war between Israel and Iran—which is pushing oil prices to above $100 per barrel—high import tariffs, and the rollout of artificial intelligence, which is driving up costs for utilities and other sectors.

At present, debates over Federal Reserve policy have reached a fever pitch. Federal Reserve Governor Christopher Waller—an official appointed by Trump, who had been interviewed for the position that ultimately helped Warsh win—made a major shift in his own thinking on Friday. He has now aligned himself with the views of a recent group of dissenting Fed officials, arguing that the Fed should abandon its “dovish bias” from its policy outlook and open the door to possible rate hikes.

Given recent data showing that inflation is spreading throughout the economy and worsening, Waller said shortly before Warsh’s swearing-in that the Fed should make clear that the likelihood of future rate cuts is no greater than that of rate hikes. The remarks have intensified market sentiment that monetary policy will tighten and that rate hikes may occur this year.

The 56-year-old Warsh won Trump’s support after a year-long public “audition” as a top candidate. During that time, the new chair proposed ambitious reform goals for the Fed—believing that by 2011, when he resigned from the Board of Governors because of opposition to the Fed’s bond purchases, the Fed had already begun to lose its way. Now, in his first few months in office, his efforts may be dominated by an even more urgent dilemma: whether to raise rates to keep inflation from moving further away from the Fed’s 2% target, or to risk damaging his credibility as an inflation fighter from the outset.

Warsh previously told the Senate confirmation hearing that inflation is a choice for the Fed. The Fed’s control over short-term interest rates is a lever it can use to boost or restrain spending, in an effort to keep inflation at the Fed’s target level. The Fed has missed its target for more than five years, and inflation is currently more than one percentage point above the goal.

How to bring inflation down may involve some difficult trade-offs—sometimes conflicting with the policies and goals of the Trump administration, and sometimes contradicting the Fed’s other goal of maximum employment. As the 11th Chair of the Fed, Warsh will have to proceed cautiously from the start. On one hand, global bond markets have already begun to push up interest rates, signaling that worries about inflation are intensifying. On the other hand, colleagues like Waller have begun to build expectations that rate hikes may be needed. And then there is Trump, who has long viewed rate hikes as political attacks on his economic agenda and sharply criticized Powell for not lowering borrowing costs.

Warsh’s remarks and handling of a series of ongoing controversies surrounding the Fed—including the upcoming Supreme Court ruling on Trump’s failure thus far to successfully remove Fed governor Lisa Cook—will also be closely watched, and compared with Powell’s steadfast defense of Fed independence.

The next Fed meeting is scheduled for June 16 to 17. At that time, policymakers will vote on interest rates and a new policy statement, and will submit updated economic projections.

One of the substantive decisions Warsh will need to make at the earliest point is whether to release a “dot” (dot plot)—that is, where he believes interest rates will be at the end of this year. This will reveal whether his views differ much from those of the colleagues he has criticized as practicing collective thinking, or whether he will become an outlier with a mainstream-bucking perspective—potentially further disrupting markets that are already pushing up U.S. long-term interest rates.

The Fed’s monetary policy decisions affect a range of consumer-facing and politically sensitive rates, such as mortgage rates. And its current choice on inflation is being made against a backdrop in which people are shocked by prices like $4.50 per gallon for gasoline—prices that are beyond what the Fed can directly control.

These developments are a stark reminder of Trump’s lack of progress on a key presidential promise: “From day one in office, we will end inflation and make America affordable again.” Now, the task of fulfilling that promise has fallen to Warsh.

Later on Friday, the Fed said in a statement that Kevin Warsh was sworn in as Chair of the Federal Reserve and as a member of the Board. The Fed said that the Federal Open Market Committee (FOMC), which is responsible for setting interest rates, also unanimously voted on Friday to appoint Warsh as its Chair. Warsh’s four-year term as Chair will end on May 21, 2030.