Kevin Warsh nomination for Fed chair remains in limbo as Powell's term nears end and dual mandate debate persists

Kevin Warsh would like to begin as Federal Reserve chairman, but his nomination to lead the central bank remains in limbo. The longer the process drags on, the more the U.S. economy is exposed at a time when oil prices are rising and inflation risks are looming.

Jerome Powell, the current Fed chair, is effectively a lame duck after disputes with President Trump over interest rate policy. Trump has also moved to remove Powell even before his term ends in May, including a DOJ investigation related to Powell’s testimony concerning the costly rehabilitation of the Fed’s headquarters in Washington, D.C. The probe has drawn criticism from financial professionals and some Republicans, who argue it is exaggerated and undermines the Fed’s long-standing independence as an agency that controls the money supply.

Sen. Thom Tillis, a ranking Republican on the Senate Banking Committee, has said he will not advance Warsh’s nomination to a full Senate vote unless the Powell investigation is resolved. A Tillis representative said there was no change to that position as the report went to press.

Stalemate over the nomination

The situation has produced a stalemate, with the prospect that Powell could remain in office for the foreseeable future. One possibility is that Powell could stay while a replacement is prepared, with the Fed operating on an interim basis. In the meantime, monetary policy direction remains uncertain.

Even so, the debate is not strictly binary: some critics of Trump’s approach to removing Powell still argue that Warsh should take over as soon as Powell’s term ends.

Why Warsh’s supporters argue for a faster transition

Understanding the Fed’s “dual mandate”

Supporters of Warsh’s nomination argue the Fed needs a chair who understands the limits of the role and why the agency was created under the Federal Reserve Act in 1913. At the time, Congress and then-President Woodrow Wilson envisioned a central bank focused on controlling the money supply, protecting the dollar’s value from inflation and devaluation, and acting as a lender of last resort during banking panics.

Over time, those responsibilities evolved into the “dual mandate.” The Fed is required to maintain price stability—keeping inflation low—while also pursuing “maximum employment.” Supporters note that balancing these goals is difficult, because the line between controlling inflation and avoiding recession is not straightforward.

Powell’s record and the politics of rate decisions

The article notes that Powell faced a difficult environment, including chairing the Fed through the COVID period, when the economy was shut down and extensive monetary support was needed to prevent collapse. Powell was appointed during Trump’s first term, and the two reportedly did not align well on policy.

It also states that Trump believed the Powell Fed was reluctant to cut rates in ways that would satisfy him. After Trump won a second term, the conflict intensified again.

The article highlights that Powell sharply cut interest rates in September 2024, just weeks before the presidential election between Democrat Kamala Harris and Trump. It adds that while Powell’s supporters might argue the cuts were consistent with cooling inflation and slowing growth, the decision did not sit well with the economic team Trump brought to the White House after the election.

Concerns about “mission creep”

Warsh’s supporters argue that the Fed under Powell expanded beyond what Congress envisioned when it created the central bank. The article says Warsh has raised concerns that the Fed, under Powell, doubled down on acting as a policy-making arm of the government by using its large balance sheet to influence interest rates and economic growth—roles supporters believe should be handled by elected officials.

The article also points to Powell’s public support for Diversity, Equity and Inclusion and Environmental, Social, and Governance priorities, including the Fed monitoring climate-related risks to the economy. It says this approach ended after Trump was elected and issued an executive order ending such practices in government.

Warsh’s stated direction

According to the article, Warsh is promising to bring the Fed “back to its basics.” It concludes that, despite that intent, he cannot start immediately.