Fates of Trump, Warsh tied for better or worse ANALYSIS-Trump and Warsh's fates are now tied, for better or worse

ANALYSIS

WASHINGTON - Former U.S. Federal Reserve Chair Jerome Powell was a handy foil for President Donald Trump, a target of blame for everything from high mortgage interest rates to the pace of economic growth.

But with new Chair Kevin Warsh now installed as the country's central bank chief - completing Trump's influence across the top echelon of U.S. economic policy-making posts - the dynamic shifts.

Where Trump previously could claim Powell was foisted on him in his first administration by advisers like then-Treasury Secretary Steven Mnuchin, Warsh is Trump's pick, and the president owns the results. Trump first nominated Powell in 2017.

As if to emphasize the stakes, Trump hosted Warsh at a White House swearing-in ceremony on Friday that included cabinet secretaries, Supreme Court justices and top White House advisers in a pep rally atmosphere, saying in extended remarks that he wanted Warsh to "do your own thing and do a great job."

"Kevin understands that when the economy is booming that is a good thing ... we want it to boom ... We don't want to see it stifled," Trump said.

Midterms

After campaigning and winning a second term on promises of lowering prices and addressing larger affordability issues for U.S. households, Trump's approval rating on the economy slipped dramatically.

A reading of consumer sentiment posted about 90 minutes before Warsh's swearing-in showed a broadly glum mood across America. That included confidence in the economy among independents - a key voting bloc in fast-approaching midterm congressional elections - and even Republicans tumbling to the lowest level of Trump's second term.

The interest rate on 30-year home mortgages rose back above 6.5%, a nine-month high and a continuing weight on an anemic housing market.

Prices in general continued rising under Trump, despite campaign pledges that they would fall from "day one" of his presidency: Since March 2025, the inflation gauge the Fed uses to set its 2% target has accelerated from 2.3% annually to 3.5%.

A gallon of gas, on average, cost $4.55 as of Friday, compared with less than $3 before Trump launched attacks on Iran in late February.

Just how Warsh's performance as Fed leader in his first months might shape the prospects of Trump's Republican Party in the midterms is unclear - and fraught with potential pitfalls.

High inflation is never kind to incumbent parties facing voters anxious about their wallets, but battling it involves tough medicine usually in the form of interest rate hikes that are also rarely popular - and certainly would not be welcomed by Trump.

Moreover, the Fed remains a diffuse body where the new chair will have to build his authority over time - all while the world looks for evidence of Trump's influence.

"Powell was a really great scapegoat for Trump for issues that had nothing to do with Powell," said Richard Stern, who studies economic policy at the conservative Advancing American Freedom think tank. Now "it's going to be Trump's economy."

"The big thing everybody was concerned with, the price increases, the affordability problem, all of that isn't going to go away for years, many years, probably," he said. "And that's independent of anything Trump is going to do or could do, and it's independent of anything Warsh is going to do."

An unwieldy system

Powell, because of Trump's efforts to undermine the Fed's standing to set monetary policy free of his influence, chose to stay on as a Fed governor, another unusual aspect of Warsh's opening months as head of the world's most powerful central bank, the institution other major central banks turn to for dollars in a pinch.

Even though some Fed chairs exercised decisive influence, including past leaders like Paul Volcker and Alan Greenspan, the U.S. central bank is unwieldy by design, with a seven-member Board of Governors based in Washington and 12 presidents of regional Fed banks all participating in policy debates.

In recent years decision making drifted towards more consensus-building by the chair. Warsh has said he favors a different, no-holds-barred debate approach, with more dissent, and a willingness to potentially surprise financial markets with policy decisions free of the forward guidance commonly used in recent years to prepare the public.

Whether global investors are ready for that approach remains an open question, but if recent Fed meetings are any indication, his colleagues seem primed to deliver the "family fight" Warsh said during his confirmation hearing he relishes.

The April Fed meeting saw the most dissents in more than 30 years, and minutes of the meeting showed a majority of Warsh's new colleagues think interest rates may need to rise - the opposite of what Trump until recently said he expects and what Warsh until recently made the case to deliver.