Kevin Warsh at the Fed |
The Federal Reserve got a new leader last Friday, but his power may not be as vast as it might seem. The Senate confirmed Kevin Warsh, President Trump's pick for Fed chair, in a 54-45 vote on Wednesday. Mr. Trump's goals for the monetary policy job are not difficult to discern: he has openly pressed the Fed to slash interest rates for months, and has repeatedly lashed out at outgoing Chair Jerome Powell for not rapidly cutting rates. Warsh, who has vowed to be an independent actor and said he will not set policy based on the President’s views, will get a chance to weigh in next month, when the Fed's interest rate-setting committee is scheduled to have its next meeting. His plans are not clear. He suggested some openness to rate cuts last year, but in a prior stint as a member of the Fed's Board of Governors, he was known for favouring tighter monetary policy. The thing is, he won't be able to decide on rates all on his own. Fed chairs usually have a great deal of influence over the rate-setting committee, but their power is not absolute. So, it is expected that Warsh will need to work to form a consensus on the right path forward. A tricky task by any stretch of the imagination in an economic landscape marked by uncertainty, fears about the Iran war and a stubborn inflation problem. Most Wall Street financial analysts expect interest rates to remain steady for the next few months. Plus, at least for now, Jerome Powell, the President’s nemesis, is planning to remain on the Fed Board, after a controversial criminal probe by........