Fed chief nominee Kevin Warsh clears key hurdle in Senate, on track to succeed Jerome Powell

• The Senate Banking Committee voted 13-11 along party lines to advance Warsh's nomination after the DOJ dropped its investigation into Powell on April 25
• The full Senate could vote the week of May 11, potentially allowing Warsh to be sworn in by May 15 when Powell's leadership term ends, though uncertainty remains about whether Powell will stay on the Fed Board through January 2028
• The Fed is expected to hold rates steady at 3.50%-3.75% amid elevated inflation, while Trump has repeatedly stated he wants Warsh to deliver rate cuts

Summary:

Kevin Warsh has cleared a critical procedural hurdle toward becoming the next Federal Reserve Chair, with the Senate Banking Committee advancing his nomination along party lines. All 13 Republicans supported Warsh, while 11 Democrats voted against, citing concerns about his independence from presidential influence.

Key Timeline and Figures:

• Full Senate vote expected the week of May 11
• Warsh could be sworn in by May 15, when Jerome Powell's leadership term expires
• Warsh is a 56-year-old lawyer, financier, and former Fed governor
• Powell's Board of Governors seat extends through January 2028

Market Context:

The Federal Open Market Committee (FOMC) is expected to hold its benchmark interest rate steady at 3.50%-3.75% due to elevated inflation and upward price pressures from global oil supply disruptions related to the Iran war. Warsh has promised "regime change" for the central bank and reportedly aligns with President Trump's preference for rate cuts.

Political Controversy:

The nomination occurs amid unprecedented White House pressure on Fed independence. The Department of Justice opened a criminal investigation into Powell, which he characterized as political intimidation. DOJ official Jeanine Pirro announced Friday she would drop the investigation but reserved the right to resume it, which Senate Democrats Warren and Durbin condemned as threatening future Fed independence.

Uncertainty Ahead:

Whether Powell will resign from the Fed Board entirely or remain as a governor remains unclear. Trump has threatened to fire Powell, which would likely trigger legal challenges, similar to his previous attempt to remove Fed Governor Lisa Cook.