Amid Inflation Worries, Senate Set To Confirm Warsh as Federal Reserve Chairman

The Senate is expected to confirm Kevin Warsh as early as Wednesday to become the Federal Reserve’s new chairman, a vote that has been delayed by senators who balked over a now-closed criminal investigation into the current head of the central bank, Jerome Powell.The Senate voted 51-45 on Tuesday to confirm Mr. Warsh to the Fed board, the first step of the process. The senators then passed a motion to limit debate over the chairmanship nomination, allowing the vote on his leadership of the board to take place as early as one day later.President Trump nominated Mr. Warsh in January to replace Mr. Powell, whose term as chairman ends on Friday. Mr. Warsh’s confirmation process was delayed after the U.S. attorney for the District of Columbia, Jeanine Pirro, opened a criminal probe into Mr. Powell related to cost overruns on a $2.5 billion renovation of the Fed headquarters at Washington, D.C.One of the allegations was that Mr. Powell lied to Congress when questioned about the overruns on the project. Senator Thom Tillis, a key Republican vote on the Banking Committee, said he would hold up the confirmation vote until the criminal investigation into Mr. Powell finished. Mr. Tillis said he was concerned about the independence of the central bank.After first saying last month that the probe would continue, Ms. Pirro made an abrupt reversal two days later after Mr. Trump suggested he would be open to an alternate investigation.Ms. Pirro said she was ending her probe because the Fed’s inspector general had been assigned to scrutinize the building costs, an investigation that had been ongoing since last summer.Ms. Pirro noted that she would not hesitate to restart her investigation in the future. Mr. Powell said he would not be threatened into leaving the board of governors, where he can remain as a member for an additional two years.With Mr. Powell staying, it means Mr. Warsh will be thrust into a potentially awkward situation of voting alongside his predecessor on the board.Along with Mr. Powell, a governor that Mr. Trump has attempted to fire, Lisa Cook, also remains on the board. Mr. Trump cited allegations of mortgage fraud in announcing he was going to fire Ms. Cook despite her not ever being criminally charged. Ms. Cook is fighting the dismissal, arguing that her removal was for political reasons and not “for cause” as required. She says she was not given due process in fighting the allegations.The Supreme Court has temporarily allowed Ms. Cook to stay in her role and has heard arguments in her case but has yet to rule. The justices have given Mr. Trump broad authority to fire other federal appointees but have cautioned that the Fed is unique.Mr. Trump has been highly critical of the central bank and Mr. Powell as part of a pressure campaign to lower interest rates. Mr. Warsh will face that same pressure from the White House to cut rates but is stepping into an environment that could make cuts harder to justify. In April, consumer prices rose 3.8 percent compared to a year earlier, mostly attributable to rising gas prices resulting from the conflict with Iran, the Federal Reserve of New York reported on Tuesday. The Fed has traditionally sought a target rate of two percent for inflation. As global supply shortages mount, the president has predicted that elevated prices are only going to be a short-term concern.If the inflation rate remains elevated, however, talk of possible rate cuts could be replaced by worries over the need for rate increases to cool higher production and transportation costs and accompanying wage demands.

Amid Inflation Worries, Senate Set To Confirm Warsh as Federal Reserve Chairman

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