Senate Confirms Kevin Warsh as Fed Chair on May 13 — Powell Era Ends May 15; Warsh Inherits Worst Inflation Data Since Iran War Began

The United States Senate completed the second and final step of Kevin Warsh's Federal Reserve Chair confirmation process on May 13, 2026 — just two days before Jerome Powell's Chair term expires on May 15. The confirmation completes a historic transition: the first new Fed Chair since Powell succeeded Yellen in February 2018, and the first Chair confirmed by a purely partisan Senate Banking Committee vote in American history. **Senate confirmation timeline (complete):** - **April 21, 2026:** Senate Banking Committee confirmation hearing; Warsh states 'I will not be the President's sock puppet' on Fed independence - **April 29, 2026:** Senate Banking Committee advanced Warsh 13-11 — first fully partisan Fed Chair committee vote in US history (all Democrats opposed) - **May 11, 2026:** Senate cloture vote passed 49-44 — Senators Fetterman (D-PA) and Coons (D-DE) crossed party lines; vote cleared the 51-vote threshold - **May 12, 2026:** Senate confirmed Warsh to Federal Reserve Board of Governors (14-year term) — the required first of two steps - **May 13, 2026:** Senate confirmed Warsh as Federal Reserve Chair — 30-hour procedural countdown completed; vote passed largely along party lines - **May 15, 2026:** Powell's Chair term officially expires; Warsh assumes Chair responsibilities **What Warsh inherits — the stagflation inheritance (as of May 13):** 1. **April CPI:** 3.8% YoY — highest since May 2023 (released May 12) 2. **April PPI:** +6.0% YoY — hottest since December 2022 (released May 13) 3. **Core PCE:** 3.2% (March 2026, released April 30) — far above 2% target 4. **Fed Funds Rate:** 3.50–3.75% (held since December 2025; three consecutive unanimous holds) 5. **CME FedWatch:** ~30% probability of at least one rate hike by year-end (raised after hot April CPI) 6. **S&P 500:** ~7,400 (elevated — Shiller CAPE ~39, far above historical mean) 7. **Oil:** Brent ~$105–$110/bbl (Iran war energy shock; Hormuz partial blockade) 8. **Unemployment:** 4.3% (April 2026; rising from 3.4% trough) 9. **Section 122 tariff cliff:** July 23, 2026 (71 days away from May 13) **Warsh's policy framework and market risks:** Warsh has described himself as committed to 'regime change' at the Federal Reserve, criticizing the post-COVID inflation response as a 'fatal policy error.' His key stated priorities: - **Balance-sheet reduction:** Warsh has argued for more aggressive Quantitative Tightening to reduce the Fed's ~$7.2 trillion balance sheet; if he pursues faster QT than Powell's approach, long-term yields could rise materially - **Credibility restoration:** Warsh argues the Fed's credibility was damaged by the 2021-2022 'transitory inflation' episode; he may pursue hawkish signaling even without rate hikes to anchor expectations - **Independence:** Despite acknowledging President Trump's pressure for rate cuts, Warsh testified he would not pre-commit to any rate path **Powell's legacy at handoff:** Jerome Powell will return to his Federal Reserve Governor seat (term through January 2028) after leading the Fed through the most challenging macro environment since Volcker: - Supervised the return from near-zero rates (0.0–0.25%) to peak 5.25–5.50% and partial easing back to 3.50–3.75% - Navigated the post-COVID inflation surge without causing an NBER-declared recession - Managed the Iran war energy shock through three consecutive unanimous holds - Handoff: Q1 2026 GDP +2.0% (no recession), but inflation unsolved — CPI 3.8% and PPI 6.0% announced in the final 48 hours of his Chair term **First test: June 9-10 FOMC (Warsh's inaugural meeting as Chair)** With PPI at 6.0% and CPI at 3.8%, the June FOMC meeting will be Warsh's defining moment. Three scenarios: 1. **Hold with hawkish signal:** Most likely — hold at 3.50–3.75% with forward guidance indicating the next move is more likely a hike than a cut; this alone could push long-term yields higher 2. **Hold with neutral signal:** Possible if Trump-Xi summit delivers meaningful tariff de-escalation (reducing the energy/inflation component) 3. **Rate hike:** CME odds ~30% by year-end; a June hike would be the most dramatic opening statement of the Warsh era and could trigger a significant equity correction