Warsh 54-45 Approved by the Fed Chairman: the most divisive vote in history; Powell reappointed

The U.S. Senate passed Kevin Warsh’s nomination to become the next chair of the Federal Reserve on May 13, with a vote count of 54 in favor and 45 against, according to CNN. This is the most divided vote for a Fed chair nomination in modern history. Warsh will become the 17th chair of the Federal Reserve, succeeding Powell, but Powell will remain a member of the Federal Reserve’s Board of Governors until January 2028, creating a two-headed structure that has not appeared since 1948.

54-45: Only one Democratic senator crossed party lines to support it—most divided vote in modern history

The entire vote was carried out almost entirely along party lines, with only Pennsylvania Democratic senator John Fetterman voting in favor alongside all Republican senators. CNN described it as “the most divided vote in the history of Fed chair nominations.” Previously, Republican senator Thom Tillis had blocked Warsh’s nomination due to the Department of Justice’s investigation into renovation work at Powell’s Fed headquarters. After that investigation was withdrawn in April, the nomination was able to move forward.

Democrats’ concerns about Warsh center on the central bank’s independence. Senator Elizabeth Warren criticized him for becoming a “sock puppet” of Trump. White House economic adviser Kevin Hassett denied that there was any pressure and said markets expect Warsh will “lower interest rates over time.”

Powell stays on as a governor; the two-headed structure is seen for the first time since 1948

Although Powell steps down as chair, he will keep his seat as a governor of the Federal Reserve until January 2028. In his resignation statement, he said he would “support the new chair in any way that helps,” while stepping away from the spotlight. The arrangement of a former chair remaining as a governor has not been seen since Mariner Eccles in 1948, and it could practically create a two-headed decision-making structure with the chair and the former chair operating in parallel.

Warsh’s first FOMC meeting is scheduled for June 16-17. According to CNN’s compilation, he is expected to push for three changes:

Shrinking the Federal Reserve balance sheet of $6.7 trillion

Cutting FOMC meetings from 8 times a year to 4 times

Reducing the frequency of the chair’s press conferences

These changes point in the opposite direction to the high-frequency communication approach during Powell’s tenure, and may alter market expectations for the timing of information about Fed policy.

Standoff between rate-cut pressure and inflation: Investors expect rates to stay put by year-end

Trump has long been pressuring Powell to cut rates and even publicly said that if Warsh does not cut rates, “he will sue Warsh.” But the current inflation environment is not on Trump’s side. April core PPI rose 1% month-on-month, the hottest since 2022, and the conditions for rapid rate cuts have not been met—especially with geopolitical energy-price uncertainty.

At the market level, investors expect the Federal Reserve’s policy rate to remain unchanged through the end of this year. Warsh’s first challenge after taking office will be how to find a credible path between “political expectations of rate cuts” and the fact that “inflation pressure has not eased.” The arrangement in which Powell remains as a governor further increases the difficulty for Warsh to build consensus inside the FOMC—if Powell and most governors lean toward waiting and watching, Warsh may not be able to secure a majority even if he personally wants to cut rates.

Chain News Watch: For Crypto and global risk assets, Warsh’s tenure kickoff is full of uncertainty. On one hand, Trump clearly expects him to preside over a rate-cutting cycle, which—if it happens—could bring liquidity overflow. On the other hand, the two-headed structure with Powell staying on as a governor may cause the policy direction to shift less quickly than the market expects. The June 16-17 FOMC will be the first clear observation anchor.

This article first appeared in Chain News ABMedia: Warsh passes the Fed chair 54-45—most divided vote in history; Powell stays on as a governor