Powell confirmed last week that he plans to remain on the Board of Governors until the criminal investigation into his role in the Fed's building renovation is resolved. That means Powell will not simply hand the keys to Kevin Warsh, Trump's nominee to succeed him, and walk out the door. He will stay, creating an unusual and potentially disruptive dynamic in which a lame-duck Fed chair and his designated successor are both nominally present during one of the most consequential policy stretches in recent memory.
The Senate Banking Committee delayed a confirmation hearing for Warsh that had been scheduled for this week. That delay extends the leadership uncertainty into a period when markets are desperate for clarity about the Fed's inflation-versus-growth calculus. We covered the broader Fed bind in our piece on why the market was pricing in a rate hike for the first time this decade.
Warsh's views on inflation are generally considered more hawkish than the current median FOMC member, which would be consequential in an environment where the market is debating whether the next move is a cut or a hike. Senator Elizabeth Warren sent a pointed letter citing concerns about his performance during the 2008 financial crisis. If Warsh arrives at the Fed inclined to prioritize inflation-fighting over growth support, the market's current expectations for rate cuts in late 2026 could be significantly mispriced according to CME FedWatch data.
The macro story of 2026 is not just about oil and Iran. It is about an institution navigating one of its most difficult transitions at one of the most difficult macro moments in recent memory.
