Trump personally selected Kevin Warsh, ending the era of Jerome Powell as the convenient scapegoat. From high mortgage rates to slowing economic growth, Powell had shouldered the blame during Trump's first term. Now, with Warsh officially installed as Federal Reserve Chair, Trump has completed his overhaul of the core U.S. economic policy circle, and the dynamic has shifted entirely.

Previously, Trump could argue that Powell was an appointment forced by advisors like former Treasury Secretary Steven Mnuchin. However, Warsh is Trump's own choice, meaning the President must now take full responsibility for economic outcomes.

To underscore the significance of the appointment, Trump presided over Warsh's swearing-in ceremony at the White House last Friday. The event, attended by cabinet members, Supreme Court justices, and senior White House advisors, carried the atmosphere of a political rally. In lengthy remarks, Trump encouraged Warsh to "go for it" and "make things happen."

"Kevin understands that economic prosperity is a good thing... We want prosperity; we don't want to stifle growth," Trump emphasized.

Midterm Election Test Trump won re-election on a core promise of lowering prices and easing the cost-of-living burden, but his economic approval ratings have since fallen sharply.

A consumer confidence index released about 90 minutes before Warsh's swearing-in showed widespread public pessimism. Confidence among key swing groups—independent voters and even Republican supporters—has fallen to its lowest point in Trump's second term.

The 30-year fixed mortgage rate has climbed back above 6.5%, hitting a nine-month high and continuing to weigh on a sluggish housing market. Despite campaign pledges to "lower prices on day one," costs continue to rise. Since March 2025, the Fed's preferred inflation gauge, the PCE index, has increased from 2.3% to 3.5%.

As of last Friday, the national average price for gasoline reached $4.55 per gallon, compared to under $3 before Trump's military action against Iran in late February.

Warsh's policy performance in his first month will directly impact Republican prospects in the midterm elections, a path fraught with uncertainty and risk.

High inflation is historically unfavorable for the party in power, and curbing it often requires the "strong medicine" of interest rate hikes—a move deeply unpopular with the public and one that would likely contradict Trump's own preferences.

Furthermore, power within the Fed is diffuse. A new chair needs time to establish authority, while global markets are closely watching Trump's influence over the central bank.

Richard Stern, an economic policy researcher at the conservative think tank Advancing American Freedom, stated bluntly: "Powell was the perfect scapegoat for Trump. Many issues weren't his fault but were pinned on him. Now, the economy is Trump's economy... Problems like inflation and the cost-of-living burden will be difficult to solve for years to come, and that's not due to the policies of Trump or Warsh."

Warsh: A Well-Credentialed 'Insider' Navigating a Fractured Fed The 56-year-old Warsh, a lawyer and financier, served as a Federal Reserve Governor from 2006 to 2011 and has been positioning himself for the top job ever since.

His professional mentors include famed monetarist economist Milton Friedman and former Secretary of State George Shultz. Collaboration with Wall Street titan Stanley Druckenmiller helped him amass significant wealth, and his wife is an heir to the Estée Lauder cosmetics fortune.

However, it was his deep political and business ties to Trump that secured him the nomination. Trump has admitted that passing over Warsh for Powell in 2017 was a major regret.

Powell, having long resisted Trump's attempts to influence monetary policy, chose to remain on the Fed's Board of Governors after his term as Chair ended—adding further complexity to Warsh's start. The Fed, as the world's most influential central bank, is designed with diffuse power: policy discussions involve a seven-member Board in Washington and the presidents of 12 regional Federal Reserve Banks.

Historically, chairs like Paul Volcker and Alan Greenspan dominated decision-making, but in recent years the Fed has relied more on consensus. Warsh advocates for a starkly different approach: unfiltered debate, encouraging dissent, and a willingness to surprise markets with policy moves, moving away from the "forward guidance" commonly used in recent years.

Whether global investors can adapt remains uncertain, but signs emerged at the April Fed meeting: dissenting votes reached a 30-year high, with a majority of officials leaning toward rate hikes—a direct contradiction to Trump's previous expectations for cuts and Warsh's own earlier statements.

The Fed's internal factions are complex: there are economists with deep academic backgrounds, seasoned investors with market experience, and former Chair Powell. Of the six other Governors, three were appointed by President Biden, one of whom, Lisa Cook, is currently facing dismissal by Trump.

Despite internal divisions, a market consensus has formed: with inflation high, interest rate hikes are inevitable. Long-term U.S. Treasury yields, which determine borrowing costs for consumers, have already begun to rise.