Kevin Warsh is preparing to take over as chair of the Federal Reserve as Jerome Powell’s term concludes on Friday, ending one of the longest and most closely scrutinised tenures in the central bank’s recent history.
Warsh, a former Fed governor who served during the 2008 financial crisis, inherits a policy debate that has shifted sharply in recent weeks. The conflict with Iran and the effective closure of the Strait of Hormuz have pushed up oil prices and revived concerns that inflation could prove sticky.
Traders have responded by raising the odds of a Federal Reserve interest-rate increase later this year to about 45%, according to the CME FedWatch tool, with the most likely outcome a single hike to a range of 3.75% to 4%. Only a month ago, markets put the probability of any 2026 hike at around 1%.
The repricing has rippled through bond markets. The yield on the 10-year Treasury note climbed to 4.55% this week, its highest level in a year, tightening financial conditions for borrowers.
Investors and economists will watch closely for any signal that Warsh intends to chart a different course from his predecessor, particularly on the balance between containing inflation and supporting growth.
The leadership change arrives at an unusually delicate moment, with the central bank navigating an oil-driven inflation threat that monetary policy alone cannot easily resolve.