The uncommon obstacles facing Powell's nomination and the indeterminacy of his retention! The prospects for the Federal Reserve's monetary policy are further clouded by huge uncertainties.

President Trump has not yet formally nominated Kevin Warsh to succeed Jerome Powell as chairman of the Federal Reserve. This delay, while not unprecedented, is not common, and adds more uncertainty to a process that was already facing concerns about political pressure on the Fed from external forces. The ability of the Fed to control inflation and guide the economy to maintain healthy operation, free from short-term political influences and regardless of presidential preferences, is widely seen as crucial. President Trump announced the nomination of former Federal Reserve Governor Warsh as the next Chairman of the Federal Reserve four weeks ago. Since 2010, there have only been two instances of a nominee for the Chairman or Board of Governors waiting over four weeks between the announcement of the nomination by the White House and the submission of formal confirmation documents to the Senate. The reasons for the delayed nomination of Warsh are not clear, but Republican Senator Thom Tillis has promised to block any nomination for the Federal Reserve as long as the Department of Justice continues its investigation into the renovation of the Washington Fed building, which involves Powell testifying before Congress. Tillis claims that the investigation is baseless and is a form of intimidation by the Trump administration. The Trump administration has publicly expressed dissatisfaction with Powell because the pace and extent of interest rate cuts did not meet the governments expectations. Derek Tang, an analyst at LH Meyer, said: The lack of progress in the Warsh nomination is indeed strange. The White House seems to have not found a way to break Tillis' blockade. The senator has stated that he will not allow any nomination for the Fed to progress through the Senate Banking Committee until the investigation into Powell is concluded. White House spokesperson Kush Desai stated: The White House continues to work with the Senate to promptly confirm Kevin Warsh as the next Chairman of the Federal Reserve. He added that Warsh is fully qualified to restore the decision-making capability and confidence of the Federal Reserve. Treasury Secretary Scott Bessent stated that the Senate Banking Committee, controlled by Republicans, has agreed to hold a confirmation hearing once Warsh is formally nominated. Committee Republican members, including Tillis, believe that Warsh is qualified and the right choice for the position. However, without Tillis' support to advance the nomination to the full Senate for consideration, the committee's slim Republican majority cannot overcome the unified opposition of the Democrats. Investigation into Powell Powell revealed the Justice Department's investigation in January, calling it part of the threats and continued pressure exerted by the Trump administration to force the Fed to lower interest rates. The Fed has already implemented rate cuts at its last three meetings in 2025, but Trump is still demanding further significant reductions in borrowing costs. Reports on Thursday indicated that the Fed had asked a judge to dismiss subpoenas issued by the government in the investigation. The Fed declined to comment on the reports. This investigation is not the only obstacle that a Trump-supported Chairman who favors rate cuts would face in replacing Powell. Countdown begins With only 11 weeks left until Powell's term ends on May 15, this is shorter than the time most Fed governors have gone through between nomination and confirmation by the Senate. However, time pressure can be overcomelast fall, the Senate confirmed Trump economic advisor Stephen Miran as a Fed governor within two weeks of nomination. But if the Warsh confirmation process is significantly delayed, it would create an awkward hanging in the balance situation as the Fed meeting on June 16-17 approaches, which is seen as the earliest possible time to seriously discuss rate cuts. Fed Chair Game? It is expected that Trump will nominate Warsh to replace Stephen Miran as a Fed governor, whose term ends on January 31 but can be extended until his successor is confirmed by the Senate. This change would replace one rate cut supporter with another, allowing Trump-appointed governors to have a majority with only one seat remaining in the seven-member Fed Board. Trump has in an unprecedented way tried to dismiss Fed Governor Lisa Cook, alleging misrepresentation in mortgage applications. Cook, appointed by former President Joe Biden, denies any wrongdoing and opposed her dismissal in a case heard by the Supreme Court. Powell attended the oral arguments in January, calling it the most important legal case in the 113-year history of the Fed due to its impact on the central bank's independence. Will Powell Stay? If Powell chooses to do so, he can continue to serve as a Fed governor until at least January 31, 2028. He has not indicated whether he will leave the Board of Governors after his term as chairman endsalmost all former chairmen have chosen to step down. Breaking this precedent would be an extraordinary move, raising concerns about whether the Fed can continue to operate independently. These concerns include: Trump's explicit condition of support for rate cuts as a requirement for his nominee to succeed, and the unprecedented pressure the government is exerting on the central bank leadership, including through the Justice Department investigation. However, continuing to stay on will almost certainly invite criticism from the Trump administration and others, accusing Powell of partisan motives and attempting to obstruct the President's appointment of new governors. Leadership Issues Even if Powell continues to serve as a governor, it is almost certain that the Federal Open Market Committee (FOMC) of the Fed will follow institutional norms and elect Warsh to lead the committee responsible for policy-making. This would put Warsh in a more complex situationhe already needs to persuade a divided committee to support the rate cuts he wants to push for, while also having to participate in policy-making alongside someone who previously held the position.