Kevin Warsh made his case for the position of Federal Reserve Chairman during a Senate Banking Committee hearing on Tuesday. Experts say a change in Fed leadership could have a far-reaching impact on consumer borrowing costs.
The Fed chair candidate, nominated by President Donald Trump to replace current Chairman Jerome Powell, told senators about his approach to setting interest rates as the preferred tool for combating inflation.
“The Fed has interest rate tools and balance sheet tools,” Warsh said at Tuesday’s hearing, among the various tools the central bank has at its disposal to promote maximum employment and stabilize prices. “In my view, the interest rate tool falls into the gap and it’s fairer that way.”
The Fed sets the interest rate, called the federal funds rate, that banks charge each other for overnight loans. That interest rate affects many consumers’ borrowing and savings rates.
How the Fed affects your finances
Short-term interest rates, such as credit card rates, generally track closely with the Federal Reserve’s benchmark. Long-term interest rates, such as mortgage rates, are more affected by inflation and other economic factors.
When the Fed raises its benchmark interest rate, it makes borrowing more expensive for consumers and businesses, which could dampen the economy and worsen inflation. Lowering interest rates may stimulate spending and boost the economy, but it also causes prices to rise.
The Fed’s moves require a delicate balance, as both high interest rates and high prices can hurt consumers.
President Donald Trump’s nominee for head of the Federal Reserve System, Kevin Warsh, attends his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee in Washington, April 21, 2026.
Graham Sloan | Bloomberg | Getty Images
If approved, Mr. Warsh, a former Wall Streeter and former Fed director, would take over when Mr. Powell’s term ends next month.
President Trump has repeatedly criticized Powell for not lowering the Fed’s benchmarks and has argued that interest rates should be lowered significantly. President Trump said that keeping the federal funds rate high would put the United States at an economic disadvantage against countries with lower interest rates.
“We should have the lowest interest rates in the world,” President Trump said on CNBC’s “Squawk Box” on Tuesday.
In an interview with CNBC, President Trump said he would be “disappointed” if the Fed, led by Warsh, did not cut rates.
“There are signs that the Fed is actually moving to give more control to the White House and Treasury,” said Rohit Chopra, former director of the Consumer Financial Protection Bureau. Mr. Chopra is also an ally of Sen. Elizabeth Warren of Massachusetts, who criticized Mr. Warsh’s independence from Trump during Tuesday’s hearing.
Trump’s influence
During the hearing, Warren and other lawmakers questioned whether Warsh could withstand pressure from President Trump to lower interest rates.
Warsh said the central bank must remain largely independent of political influence. “Monetary policy independence is essential,” he said in prepared remarks. “Monetary policymakers must act in the national interest, and their decisions are the product of rigorous analysis, meaningful deliberation, and clear decision-making.”
Regardless of concerns about Warsh’s views, it could be some time before the nomination clears the committee. For now, Sen. Thom Tillis (RN.C.) has vowed to block the nomination while an investigation into Powell’s renovations to the Fed’s headquarters is underway.
Next is the Fed meeting in April.
The central bank suggested that policymakers’ reluctance to ease monetary policy or lower interest rates too soon stems from the goals of price stability and maximizing employment. The Iran war and President Trump’s tariff policies also complicate the economic situation.
“There is no question that rising oil prices will have ripple effects on the economy,” Chopra said.
The Fed is widely expected to keep interest rates unchanged ahead of next week’s two-day Federal Open Market Committee meeting.
“The Fed has no plans to change interest rates next week and may not change them for the rest of the year,” said Stephen Cates, a certified financial planner and financial analyst at Bankrate.
Even under new leadership, “committee members are not going to suddenly change their tune completely,” Cates said. “There are serious concerns about inflation among member states.”
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