Kevin Warsh sworn in as Fed chair at pivotal moment for US economy

By Lucy Bayly, CNN

(CNN) — Kevin Warsh was sworn in Friday at the White House as Chairman of the Board of Governors of the Federal Reserve System, succeeding Jerome Powell in one of the world’s most powerful economic positions.

Warsh, 56, steps into the four-year role at a time of mounting uncertainty over inflation, geopolitical conflicts and volatile financial markets, alongside rising political pressure on the central bank’s independence.

“I expect he will go down as one of the truly great chairmen of the Federal Reserve that we’ve ever had, I really believe that,” President Donald Trump said during remarks from the East Room, marking his first public appearance with Warsh since he nominated him earlier this year. “He’s got abilities that very few people have, covers a lot of territory, and he’s respected by everybody.”

Warsh has not been shy about the significant changes he envisions for the Fed, which he emphasized in brief remarks after being sworn in.

“I will lead a reform-oriented Federal Reserve, learning from past successes and mistakes, both escaping static frameworks and models and upholding clear standards of integrity and performance,” Warsh said.

Hand-picked by Trump in January when expectations pointed to stabilizing growth and cooler inflation, Warsh now takes the reins of an economy that is shifting under the weight of the US-Israeli war with Iran. The oil shock has sharply pushed up gasoline prices, mortgage rates have climbed to their highest level in nine months and overall inflation has surged to the highest level in three years.

The US consumer has remained surprisingly resilient, continuing to spend despite higher prices and insulating the economy from a downturn. But affordability concerns have left many Americans unhappy about the economy, which could lead to major political ramifications for the midterm elections. Consumer sentiment is at an all-time low: Americans feel worse now than they did during wars, 9/11, the Great Recession, the Covid-19 pandemic and the inflation surge afterward.

That leaves Warsh facing a sharper balancing act and puts him under immediate pressure to signal how the Fed will respond to the tension in the US economy: Hold rates steady and wait for clarity, or shift toward a more restrictive stance if inflation proves harder to contain.

Warsh is widely viewed as being aligned with Trump, who has aggressively demanded rate cuts and even joked that he would sue Warsh if he does not lower borrowing costs. Trump has said rates must be lower to reduce the government’s borrowing costs and to juice economic growth.

But Trump said Friday he wants Warsh “to be totally independent.”

“Don’t look at me, don’t look at anybody, just do your own thing and do a great job,” Trump added. However, he repeatedly berated Powell for not lowering rates quickly enough, calling him a “numbskull” and an “average mentally person” and even threatened to fire him.

Warsh stressed his own obligation to lead the Fed independently, with the goal of lower inflation and stronger economic growth.

The Fed chair alone, however, cannot cut rates. The central bank’s monetary policy arm, the Federal Open Market Committee, sets rates based on current economic conditions and outlook, not the demands of a sitting president.

Trump said Friday he believes Warsh has “the temperament and leadership abilities to foster collaboration among the entire board, and I know he will welcome robust debate in his mission to keep prices stable and employment high. Kevin will have the full support of my administration.”

While Fed policymakers in March projected a rate cut later this year, they have shifted their thinking in recent months as they assess the economic impact of higher energy prices and geopolitical instability. The majority of policymakers now favor holding rates steady, with some even floating the possibility of a rate hike.

Warsh’s first meeting as Fed chair is set for June 16-17.

A new era for the Fed

Warsh has proposed several key changes for the central bank, including limiting Fed officials’ communications with the public regarding where they believe interest rates should be.

Warsh has also been a strong proponent of keeping the Fed out of issues that don’t have direct connections to core responsibilities. That’s in line with Trump’s thinking.

“The Fed lost its way in recent years,” Trump said.

“It became distracted by concerns far removed from its core mission and mandate, drifting into matters such as climate policy and DEI initiatives, with the Fed straying from its mandate.”

Powell, during his time as chair, was especially judicious when questioned about these topics. “The Federal Reserve is not and will not be a ‘climate policymaker,’” Powell said in a statement from 2023. “Decisions about policies to address climate change must be made by the elected branches of government.”

But he said the Fed has “narrow, but important, responsibilities regarding climate-related financial risks.”

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CNN’s Elisabeth Buchwald contributed reporting.