Senate confirmed Warsh

By Johanna Haensel and Khang Mischke

Washington (dpa) — The US Senate on Wednesday confirmed Kevin Warsh, President Donald Trump’s pick to lead the Federal Reserve, in a 54-45 vote mainly on party lines, records from the Senate, the upper house in Congress, showed.

Pennsylvania Senator John Fetterman was the only Democrat to vote for Warsh, while New York Senator Kirsten Gillibrand did not vote. Otherwise all the in favour votes were Republican and those opposed Democrats.

The full Senate vote comes after the Senate Banking Committee passed Warsh’s nomination at the end of April on strict party lines, with all 13 Republicans in favour and all 11 Democrats against him.

Democrats warned about political influence from Trump, who wants lower interest rates, on the central bank while Republicans praised Warsh as an experienced candidate.

Senate confirmed Warsh

The nomination comes at a time of growing tensions between the White House and the central bank.

Trump had repeatedly and unsuccessfully called for lower interest rates and also attacked outgoing Fed chair Jerome Powell, triggering worries in financial markets about the institution’s political independence.

Despite Trump’s undisguised desire to get Powell off the Fed Board, he will have to wait awhile longer. While the Fed chair’s term ends in mid-May – and he had announced that he would remain in office on an interim basis if no successor has been confirmed by then – Powell said at his last press conference that he would stay on the Fed board as a regular council member.

The key interest rate currently stands at 3.5% to 3.75%. However, with rising US inflation due to heftier energy costs stemming from the Iran war that Trump, together with Israel, started, the rate is unlikely to come down soon.

The president blames Powell alone for the rates, even though a 12-member committee decides on them.

Senate confirmed Warsh

Trump has also filed a lawsuit against Powell and the Fed for what he says are cost overruns on a renovation of the Fed’s building, though critics – including Powell – say the suits are designed to influence monetary policy.

Fears over the Fed’s future independence

Republican Senator Thom Tillis, a member of the banking committee, had previously announced that he would block Warsh’s nomination as long as the allegations against Powell had not been clarified.

After the Justice Department dropped the investigations, Tillis lifted his blockade, clearing the way for the committee vote.

During the partly confrontational committee hearing in late April, Warsh defended his independence from the White House.

Democrats pointed to statements by Trump that he would only appoint someone who supported lower interest rates and expected corresponding steps from Warsh in office.

Senator Elizabeth Warren, the ranking Democrat on the committee, described the future man at the top of the Fed as a possible “puppet” of the president.

Senate confirmed Warsh

Warsh told the committee that he had not committed himself to any particular interest-rate decision and that the president had never asked him to do so.

At the same time, he repeatedly avoided making specific commitments on possible rate moves.

Warsh said he did not want to commit monetary policy decisions in advance as monetary policy is complex and works with a delay.

Calls from the White House for lower rates were nothing unusual, he said.

At the same time, the former investment banker and former Fed governor during the 2008 financial crisis held out the prospect of reforms to the central bank.

He spoke in favour of scaling back the usual forward guidance on future rate moves and aligning decisions more closely with current data.

Warsh also argued for once again using interest rates more strongly as the key steering instrument and scaling back the central bank’s extensive bond purchases.

Price stability needs to move back more clearly to the centre, he said.