WASHINGTON — President Trump’s pick to lead the Federal Reserve now appears to be on a glide path to confirmation, but that doesn’t mean the central bank will deliver on his unprecedented demands for significantly lower interest rates any time soon.
Look no further than two other developments on Wednesday.
Fed officials voted to hold their key rate steady after gas prices have jumped to their highest level since 2022 because of the Iran war. And outgoing chair Jerome Powell announced the unusual step of remaining on the Fed Board of Governors until a criminal investigation of him fully plays out, denying Trump another seat to fill.
“I‘ve said that I will not leave the board until this investigation is well and truly over with transparency and finality, and I stand by that,” Powell told reporters in what he acknowledged would be his last news conference as Fed chair.
The Senate Banking Committee voted 13-11 along party lines Wednesday morning to approve Trump’s choice of Kevin Warsh to replace Powell after Senator Thom Tillis, a North Carolina Republican, dropped his objection to advancing the nomination. The full Senate is expected to confirm Warsh before Powell’s second four-year term as chair ends on May 15.
Tillis was angered by the probe launched by Jeanine Pirro, US Attorney for Washington, D.C., into whether Powell lied to the committee about cost overruns in the Fed’s renovation of its historic Washington headquarters. Tillis said the investigation was unjustified and a threat to the Fed’s independence. Powell has resisted Trump’s push for lower rates.
With Tillis holding firm on his opposition, Pirro announced on Friday that she had directed her office to close the investigation after the Fed’s inspector general began its own inquiry. That was enough for Tillis.
“I want to thank the Department of Justice for the assurances that they gave me,” Tillis told the committee after voting for Warsh. “I’ve got confidence that this investigation is over.”
Democrats on the committee did not and unanimously opposed Warsh’s confirmation.
Massachusetts Senator Elizabeth Warren, the panel’s top Democrat, noted Pirro also said on Friday that she “will not hesitate to restart a criminal investigation should the facts warrant doing so,” and Trump told reporters on Saturday that “it’s not dropped” as he ripped into the project’s cost again.
“I understand wanting to believe that there is finally an end to the president’s demands to take over the Fed. But no one is fooled,” Warren said. “Trump is still going after control of the Fed, and he is keeping the threat of bogus criminal charges alive until he gets what he wants.”
Opposing a Fed chair nominee is not new for Warren. She opposed Powell’s confirmation twice — including after former president Joe Biden nominated him for a second four-year term — because of policy disputes, particularly over financial regulation.
But she has labeled Warsh an existential threat to the Fed’s independence because Trump chose him after Powell would not bend to pressure on interest rates. Warren pointed out that during her questioning of Warsh at his April 21 confirmation, he would not cite any aspect of Trump’s economic agenda he disagreed with and declined to even say that Trump had lost the 2020 election.
Tillis said Warsh, who served on the Fed’s board of governors from 2006 until 2011, has “extraordinary” credentials. And Tillis blasted Warren for “political theater” in suggesting the Justice Department investigation into Powell was not closed.
“That’s an insult to me,” Tillis told reporters. “She wasn’t in those discussions. She didn’t get the assurances that I did, and I’m confident that we’ll move forward and in good faith and they will deliver on their commitment.”
But Powell on Wednesday also expressed concern about the investigation, noting that Pirro had said that “she would not hesitate to restart the investigation.”
Fed chairs almost always step down when their term leading the board ends. But Fed board members have 14-year terms and Powell’s does not run out until early 2028. Powell said he’s going to stick around for a while to make sure the criminal investigation ends.
“I‘m encouraged by recent developments, and I’m watching the remaining steps in this process carefully,” Powell told reporters. “My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve.”
The Fed is a unique agency created by Congress to be independent so it would make monetary policy decisions based on what’s best for the economy, not what’s good politically.
Trump has railed for months against the Fed’s construction project, one of his many outspoken criticisms of Powell — a Republican and his own pick for the job in 2017 — for not lowering interest rates more aggressively. While past presidents have prodded Fed officials in public, and even applied pressure in private, Trump’s efforts have risen to unseen levels.
He’s derided Powell “stupid,” a “dummy” and a “stubborn moron,” giving him the nickname “too late” for being slow to lower interest rates. Then Pirro, a longtime Trump ally, launched a probe of Powell late last year. The investigation came after Trump tried to fire another Fed governor, Lisa Cook, an unprecedented move stopped by a court order.
In response to Powell’s announcement Wednesday, Trump responded with more derision. “Jerome ‘Too Late’ Powell wants to stay at the Fed because he can’t get a job anywhere else — Nobody wants him,“ Trump wrote on Truth Social.
Powell said his decision was not because of “verbal criticism by elected officials.”
“I’ve never suggested that such verbal criticism is a problem, and neither has anyone else here. But these legal actions by the administration are unprecedented in our 113-year history, and there are ongoing threats of additional such actions,” Powell said. “I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors.”
The Fed held its benchmark interest rate steady on Wednesday at a range between 3.5 percent and 3.75 percent. Only one of the 12 voting members of the rate-setting committee — Trump appointee Stephen Miran — objected because he wanted to see rates lowered.
Three other members objected for the opposite reason: they were unhappy with language in Wednesday’s official policy statement indicating the next interest rate move would be a cut. The four dissents were the most since 1992 and show the challenges facing Warsh when he replaces Powell as chair.
Largely because of sharply higher gas prices, the consumer price index jumped in March to an annual rate of 3.3 percent, an inflation level far above the Fed’s preferred 2 percent level.
Trump said on CNBC last week that he would be disappointed if Warsh doesn’t cut rates when he takes over. Powell’s decision to remain on the Fed board prevents Trump from appointing another supporter of lower interest rates. And Warsh could have a difficult task in time finding the votes for rate cuts in the near future, especially with Powell still around.
“No one person controls the Fed. No one person makes an interest rate decision,” Tillis said in dismissing suggestions that Warsh alone could impose his will. “Kevin’s going to have to go in there and work to get six votes plus his to get things done.”
Jim Puzzanghera can be reached at jim.puzzanghera@globe.com. Follow him @JimPuzzanghera.