Trump and Kevin Warsh: Why the White House Now Owns Fed Outcomes

Former Federal Reserve Chair Jerome Powell often served as an easy target for criticism from President Donald Trump, who blamed the central bank leader for issues ranging from elevated mortgage rates to slower economic growth.

That political dynamic has now changed. With Kevin Warsh officially taking over as Federal Reserve Chair — and becoming another Trump-backed figure in a key U.S. economic leadership position — responsibility for future economic performance may increasingly fall on the president himself. Unlike Powell, whom Trump previously argued had been recommended by advisers during his first administration, Warsh is widely viewed as Trump’s own selection.

Trump Signals Strong Support for Warsh

The importance of Warsh’s appointment was highlighted during his White House swearing-in ceremony, attended by cabinet members, Supreme Court justices and senior advisers. Trump publicly encouraged Warsh to act independently while also emphasizing his desire for continued economic expansion.

According to Trump, a booming economy remains a priority and policies should avoid restricting growth.

Economic Pressure Builds Ahead of Midterm Elections

Despite winning reelection partly on promises to reduce living costs and improve affordability for households, Trump’s approval ratings on economic issues have weakened.

Consumer sentiment data released shortly before Warsh’s inauguration showed increasing pessimism across the U.S., including among independent voters and even Republicans — groups that could play an important role in upcoming midterm elections.

The pressure comes as several economic indicators continue moving in an unfavorable direction:

• 30-year mortgage rates have climbed above 6.5%, reaching their highest level in nine months.
• Inflation has accelerated, with the Fed’s preferred gauge increasing from 2.3% annually in March 2025 to 3.5%.
• Average gasoline prices reportedly rose to $4.55 per gallon, significantly above levels seen earlier in Trump’s term.

These developments may complicate Republican prospects in future elections if affordability concerns remain unresolved.

Inflation Creates a Difficult Balancing Act

Persistent inflation has historically hurt governing parties. However, efforts to control inflation often require higher interest rates — policies that tend to be unpopular among voters and could conflict with Trump’s preference for stronger economic growth.

Richard Stern of the conservative think tank Advancing American Freedom argued that Powell previously absorbed criticism for issues largely beyond his control. Going forward, Stern suggests economic outcomes may increasingly be associated directly with Trump’s administration. Rising costs and affordability pressures, he noted, could remain for years regardless of policy changes by either Trump or Warsh.

Who Is Kevin Warsh?

Warsh, 56, previously served as a Federal Reserve governor between 2006 and 2011. Over the years, he strengthened his credentials through connections to prominent economists and financial figures, including economist Milton Friedman and investor Stanley Druckenmiller.

His longstanding political ties to Trump are believed to have played a significant role in securing the appointment, particularly after Trump reportedly regretted selecting Powell over Warsh in 2017.

Leading the Federal Reserve May Not Be Simple

Although the Federal Reserve Chair holds considerable influence, the institution is intentionally designed to prevent concentrated control. The Fed includes seven governors in Washington alongside 12 regional Federal Reserve bank presidents, all contributing to monetary policy decisions.

Warsh has indicated he favors more open disagreement and less predictable policy communication compared with recent consensus-driven approaches. That could introduce greater uncertainty for financial markets accustomed to extensive forward guidance from the Fed.

Recent meetings already suggest divisions inside the central bank. The April Fed session recorded the highest level of dissent in more than three decades, while many officials reportedly believe further rate increases may be necessary — potentially conflicting with Trump’s economic preferences.

Investors Are Watching Closely

Markets appear increasingly convinced that inflation pressures could force interest rates higher. Long-term bond yields, which heavily influence borrowing costs for consumers, have already been rising.

As Warsh begins leading the world’s most influential central bank, investors, policymakers and voters will likely be watching whether his decisions reinforce or challenge Trump’s broader economic agenda.