Trump's push for rate cuts encountered resistance from the "hawkish" committee, Powell may face the most challenging tenure as the Fed chairman.

As the Federal Reserve is about to undergo a new round of personnel changes, the outlook for US monetary policy has become more uncertain. Kevin Warsh, nominated by President Trump to take over as the Chair of the Federal Reserve, will not only inherit the current economic situation, but also face a sharp policy divergence. While the White House hopes for a quick interest rate cut, the policy-making institution he is about to lead has clearly shifted towards a more cautious and tight stance. Minutes from the January Fed meeting showed that after three rate cuts last year, most officials believed it necessary to maintain the federal funds rate in the range of 3.50%-3.75% for a while. Some participants even suggested that if inflation remains above the target level, they should retain the policy statement of "raising rates as needed". Officials generally assessed that the downside risks to employment had eased, but the stubbornness of inflation remained a major threat. Gregory Daco, Chief Economist at EY-Parthenon, said that Warsh's situation is quite delicate in this context. "The outside world may think that Warsh is taking office with a dovish stance, but he first needs to prove that his judgment is based on economic fundamentals rather than political factors; then, he needs to convince a committee that is increasingly hawkish and comfortable with policy rates approaching neutral levels." The latest economic data has not compelled a rapid shift in policy stance. In January, the US added about 130,000 nonfarm jobs, and the unemployment rate dropped slightly to 4.3%; while hiring momentum is uneven, layoffs remain low, and initial jobless claims have not signaled a recession. In terms of inflation, the preferred inflation index of the Fed is still hovering around 3%, significantly higher than the 2% target level, and core service prices remain sticky, which does not support an immediate rate cut. Warsh himself has outlined another possible path. He believes that the productivity boost brought by artificial intelligence, deregulation measures, and capital investment expansion might push inflation down without causing an economic downturn, thus creating conditions for rapid and consecutive rate cuts. This view is highly consistent with Trump's long-standing position of "rates too high, should be lowered quickly", and his nomination is widely seen as an important step to push for a looser central bank policy. However, the Federal Reserve Chair is not a "decider based on executive orders", but one who promotes consensus through coordination and persuasion. The interest rate policy is decided by a vote of the Federal Open Market Committee, and the majority of the members in the committee do not agree with the logic of rapid rate cuts. Several officials have warned that if policy is eased prematurely before inflation is fully under control, it may reignite price pressures or weaken public trust in the central bank's commitment to fighting inflation. This tension poses a severe test for any new chairman. Pushing for a rate cut when the data does not support it could deepen doubts about the central bank bowing to political pressure; staying in line with the hawkish committee, on the other hand, could displease a president who is no stranger to pressuring the White House. Current Chairman Powell has faced public criticism from Trump several times during his tenure, and a successor will obviously have a hard time staying aloof. Looking ahead, a rate cut within the year is not entirely hopeless. If inflation returns to a clear downward trend, or if the labor market significantly weakens, the committee's policy balance may change; Warsh may also try to persuade his colleagues that productivity improvements are lowering prices in a way not fully reflected in traditional models. In addition, a recent Supreme Court ruling on tariffs could theoretically ease inflation pressure over time, but this impact remains to be seen. At least at this stage, expectations alone are not enough to shake the committee's stance. Meanwhile, there is uncertainty in Warsh's confirmation process, with Senate confirmation not certain. Republican Senator Thom Tillis has stated that he will not push for a confirmation until the investigation into overspending on the Fed's headquarters renovation, prompted by Powell's testimony last year, is overturned; the Democrats are also preparing for a more rigorous review. In addition, Powell may remain on the Fed Board after his term ends, creating a situation of a "shadow chair", which will increase internal coordination difficulties. If the pace of inflation decline is not enough to justify a rate cut, Warsh will eventually face a choice: to stay in line with the committee he leads or to cater to the president who nominated him. This choice may profoundly define the direction and historical evaluation of his future term.