US Senate approves Warsh to Federal Reserve board

NEW YORK — The United States Senate on Tuesday confirmed Kevin Warsh to a 14-year term as a Federal Reserve governor, marking a pivotal step toward his expected ascension as the next leader of the central bank.

The confirmation passed with a 51-45 vote. In a notable break from party lines, Senator John Fetterman of Pennsylvania was the sole Democrat to join the Republican majority in supporting the appointment. Warsh will succeed Stephen Miran on the board, with his term retroactively beginning on Feb 1.

Following the vote, the Senate immediately initiated the confirmation process for Warsh's concurrent four-year term as Fed chair. The transition comes as the term of incumbent Jerome Powell is set to expire on Friday.

Warsh, 56, is a lawyer and financier who previously served as a Federal Reserve governor from 2006 to 2011, playing a key role in navigating the global financial crisis during that time. His return to the board comes amid heightened scrutiny of the central bank's political independence.

Powell has announced he intends to remain on the board as a governor after his chairmanship ends, saying he plans to keep a low profile.

For his part, Warsh signaled a shift in direction for the Fed, calling for "regime change". His proposed strategy includes tighter coordination with the Treasury Department and the administration on non-monetary policies.

However, the economic landscape remains challenging. A surge in global oil prices since the outbreak of the US-Israeli war against Iran has fueled domestic inflation, significantly dampening investor expectations for rate cuts this year.

Financial markets are currently pricing in a one-in-three chance of a rate hike by December. The Fed's current target range for short-term borrowing costs stands at 3.5 percent to 3.75 percent.

The Federal Open Market Committee is scheduled to hold its next policy-setting meeting on June 16-17.

Data released on Tuesday by the Bureau of Labor Statistics showed US prices for most goods and services surged in April.

The Consumer Price Index increased at a seasonally adjusted 0.6 percent month-on-month and 3.8 percent year-on-year. Stripping out food and energy, the core CPI ticked up 0.4 percent and 2.8 percent, respectively.

The year-on-year headline rate of inflation hit the highest level since May 2023.

Analysts said the war in Iran is to blame, as prices have increased because of higher oil prices stemming from the situation in the Strait of Hormuz, through which some 20 percent of the world's oil flows.

Dean Baker, cofounder of the Center for Economic and Policy Research, said the war has sent oil prices higher and "we are beginning to see ripple effects in other areas".

"Prices are now outpacing wages, meaning that workers are on average worse off than they were a year ago," he said.

Xinhua