A historic milestone was reached in the Fed chairman nomination. On April 29, 2026, the U.S. Senate Banking Committee approved Kevin Warsh's nomination as the next head of the Federal Reserve with a strict party-line vote of 13 to 11. This critical vote, just before Powell's term ends on May 15, marks a turning point for the institution's future. The committee met in a closed session on the morning of April 29, chaired by Senator Tim Scott, and passed Warsh's nomination to the Senate floor with a vote of all 13 Republican members in favor and all 11 Democratic members against.

This marked the first ever partisan vote in the history of the Senate Banking Committee for a Fed chairman nomination. Leading Democrat Senator Elizabeth Warren argued that Warsh was "Trump's puppet" and that this vote "brought the president one step closer to completing his illegal attempt to take over the Fed." Warren emphasized that the Justice Department's criminal investigation into Powell was used as a tool of political pressure and that the timing of this vote, following its closure, was significant.

The critical development that paved the way for the nomination was South Carolina Senator Thom Tillis lifting his veto. On April 24, with the Justice Department closing its investigation into Powell, Tillis removed the block allowing Warsh's nomination to be voted on in committee, thus speeding up the process. The entire Senate is expected to approve the nomination within the next few weeks.

Not a "Shadow Chair," but a "Low Profile": Powell's Historic Decision

This historic session on April 29 also coincided with Powell's last FOMC meeting as Fed Chairman. At the press conference, Powell announced that he would remain in the Fed leadership, which was changing hands for the first time in over eight years. Although his term as chairman ends on May 15, Powell's term as a governor on the Fed's Board of Governors extends until January 2028, and he announced he would continue to hold that position.

Powell's decision stems from the Trump administration's "unprecedented" legal attacks on the central bank. "What's really at stake here is an institution that truly matters to the public: an independent central bank. And the ability of any central bank to conduct monetary policy without being influenced by political factors," Powell said, emphasizing that he would not leave the board until the Justice Department's investigation is fully and transparently concluded.

Powell also made his respect for the new chairman clear: "I plan to maintain a low profile. The Federal Reserve Board of Governors always has only one chairman. When Kevin Warsh is confirmed and sworn in, he will be the chairman." Powell categorically rejected claims of a "shadow chairman," stating, "That's something I would never do," and pledged to support Warsh wherever possible.

Artificial Intelligence and Interest Rate Cuts: Warsh's Controversial Thesis

So, what will the new chairman's course be in monetary policy? At his Senate confirmation hearing on April 21, Warsh stated his belief that artificial intelligence "can deliver significant productivity gains and act as a deflationary force." According to him, this would allow the central bank to lower policy interest rates on a sustainable basis. This approach, which argues that AI-driven productivity increases will offset inflationary pressures, stands in stark contrast to the hawkish stance of his predecessor.

However, this thesis appears likely to face significant resistance within the Fed. The four dissenting votes at the FOMC meeting that concluded on April 29, and the growing opinion among members that the next move might be an increase rather than a decrease, stand as the biggest obstacle to Warsh's desire for rate cuts. With the oil shock triggered by the Iran war rapidly pushing inflation upwards, it remains to be seen how well the "AI miracle" thesis will align with market realities.
The Collapse of Institutional Norms or the Beginning of a New Era?

The real storm brewing behind the scenes is the tension created by Powell's decision to stay. Treasury Secretary Scott Bessent, in an interview with Fox Business, said Powell's decision to remain on the Fed board was "extremely unusual" and constituted an "insult" to Warsh. "One thing I can promise you: President Trump did not ask Jay Powell to stay," Bessent said, characterizing the decision as a "violation of all Federal Reserve norms." Even more striking was Trump's response to a question in the Oval Office. When asked by a reporter, "Is Chairman Powell's decision to stay a mistake?", Trump replied, "I don't think it's a mistake. I think it's great. I've always gotten along well with him."

With Powell's decision, for the first time in Fed history, a chairman has chosen to remain on the board as a governor after his term ends – and under the direction of a chairman who appoints his successor. Powell's presence also prevents Trump from making a new appointment to the seven-member Board of Governors. On the other hand, it will take time for Warsh to consolidate the divisions within the Fed and build his own team. In the new period that will begin after May 15, the tension between the independence of the central bank and political realities is expected to escalate further.
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