Trump nominates Kevin Warsh as Fed Chair; Tillis threatens hold

The White House has formally nominated former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as Fed chair, and forwarded the paperwork to the Senate on Wednesday. The choice faces an immediate obstacle on the Senate Banking Committee, where Sen. Thom Tillis plans to hold up the nomination until the Justice Department's investigation into Powell is resolved.

Tillis, a North Carolina Republican who sits on the panel, has indicated the committee can convene a hearing, but he intends to vote against advancing the nomination while the inquiry remains open. If all Democrats on the committee align against Warsh, the nomination would not reach the full Senate.

Powell disclosed on Jan. 11 that the Justice Department had subpoenaed the Federal Reserve for materials related to his June testimony about the central bank's $2.5 billion headquarters renovation. The inquiry centers on that appearance before lawmakers.

Warsh served as a Fed governor from 2006 to 2011 and has criticized the central bank's post-pandemic period of low interest rates, arguing those policies contributed to the sharp inflation in 2021 and 2022.

More recently, Warsh has echoed President Donald Trump's push for lower rates and has argued that productivity gains from artificial intelligence could allow faster growth without adding inflation, creating room for rate cuts.

Many current Fed officials remain skeptical that AI-driven gains alone would warrant lower rates. The Fed has stressed a data-dependent approach that weighs inflation readings, labor market conditions and growth before adjusting policy.

Powell's four-year term ends in two months. The administration first announced Warsh's selection on Jan. 30, and the nomination reached the Senate this week. The Banking Committee will decide whether to send the nomination to the Senate floor, a step that could hinge on the committee's partisan split and Tillis's stated opposition.