Kevin Warsh, President Donald Trump’s nominee to lead the Federal Reserve, moved a step closer to becoming the next US central bank chief after the Senate Banking Committee approved his nomination on Wednesday, AP reported.The committee voted 13-11 along party lines, with all Republican senators backing Warsh and all Democrats opposing him. AP reported that a full Senate vote is likely next month, and Warsh could be confirmed before current Fed Chair Jerome Powell’s term ends on May 15.Warsh is a former Federal Reserve official but has also emerged as a sharp critic of the institution and Powell’s leadership.He has described the inflation surge to 9.1 percent in 2022 as the Fed’s biggest policy mistake in four decades.The committee vote came on the same day Powell chaired what is expected to be his final meeting of the Fed’s rate-setting committee as chair.At a press conference later Wednesday, Powell was expected to indicate whether he would remain on the Fed’s Board of Governors after stepping down as chair.It would be unusual for Powell to stay on, but such a move would deny the Trump administration an immediate chance to appoint another board member. Analysts say Powell may consider staying to help preserve the Fed’s independence, a key part of his tenure.Senator Tim Scott, Republican chair of the committee, said Warsh is “battle tested” and added, “It is incredibly important that we break the bind of Bidenomics on households across this nation.”Senator Elizabeth Warren, Democrat from Massachusetts, criticized the panel’s decision.Doing so “will bring the president one step closer to completing his illegal attempt to seize control of the Fed and artificially juice the economy,” she said, referring to Trump’s efforts to remove Fed governor Lisa Cook and investigate Powell.Markets widely expect the Federal Reserve to leave its benchmark interest rate unchanged at about 3.6 per cent later on Wednesday, marking a third straight hold despite Trump’s repeated calls for lower rates.Warsh has called for “regime change” at the Fed and could seek to alter several institutional practices, including the economic models it uses, how it communicates with markets, and the long-term size of its bond holdings.Such changes may matter more to investors than consumers directly.Warsh has also supported further rate cuts, which could reduce borrowing costs for mortgages, car loans and business credit. However, implementing quick cuts may prove difficult after the Iran war pushed petrol prices higher and lifted inflation to a two-year high of 3.3 per cent.The Fed typically keeps rates elevated or raises them when inflation worsens.Most of the other 11 members of the Fed’s rate-setting committee have signaled they prefer to wait and assess inflation and growth trends before changing rates.Warsh would also replace Stephen Miran, a Trump-appointed committee member who has been among the strongest voices backing lower rates.
