The Senate Banking Committee advanced the nomination of Kevin Warsh to become the next chair of the Federal Reserve on Wednesday, marking a significant step toward his confirmation by the full Senate. The committee approved Warsh’s nomination along party lines with a 13-11 vote, clearing the way for a likely confirmation in the Republican-controlled chamber.

Warsh, a former Federal Reserve governor and Morgan Stanley banker, would succeed Jerome H. Powell, whose term as Fed chair expires on May 15. Warsh’s nomination had faced a temporary blockade from Sen. Thom Tillis (R-North Carolina), who demanded the Justice Department end a criminal investigation into Powell before allowing the nomination to move forward. The investigation was dropped last Friday by U.S. Attorney Jeanine Pirro, who noted it could be reopened if the Fed’s inspector general finds evidence of wrongdoing. Tillis lifted his objection following this announcement.

At 56, Warsh is returning to the Fed's top role after being passed over in 2017 when Powell was selected by former President Donald Trump. Warsh played a notable role during the 2008 financial crisis as a liaison between Wall Street and the Fed. At his confirmation hearing last week, Warsh emphasized that he would maintain independence from the White House despite Trump’s expressed hopes for rapid interest rate cuts. Warsh stated that the president never asked him to commit to lowering rates during his potential tenure.

The committee’s vote coincided with a Federal Reserve policy meeting expected to maintain current interest rates for the third consecutive time, likely Powell’s final decision as chairman. If confirmed, Warsh has pledged an ambitious “regime change” to reshape Fed communications with the public, potentially reducing the frequency of news conferences and scaling back the practice of quarterly interest rate projections. He argues that such extensive forward guidance can anchor policymakers to outdated information and increase political scrutiny.

Economists note that Warsh’s approach may lead to markets experiencing greater short-term volatility due to less predictable Fed signaling. Vincent Reinhart, chief economist at BNY Investments, suggested this could minimize political conflicts with the central bank by limiting opportunities for criticism. Bill English, a former Fed official and Yale professor, stressed that this strategy could result in more surprises for market participants.

Warsh has been critical of recent Fed policies, asserting that the institution’s post-pandemic actions contributed to prolonged inflation. He has also expressed concerns about the Fed’s involvement in social issues such as climate and racial justice, stating the central bank should focus on its core mandate. Additionally, Warsh supports reducing the Fed’s $6.6 trillion bond portfolio but stressed that such a process would be carefully managed to avoid market disruption.

Democrats on the committee raised issues with Warsh’s financial disclosures and questioned his independence, with Sen. Elizabeth Warren (D-Massachusetts) calling him a “Trump sock puppet” who shifted his monetary views to align with the former president’s preferences. Warsh rejected these allegations, affirming his commitment to act independently if confirmed.

Warsh’s confirmation would represent a key victory for Trump, who has criticized Powell’s leadership and interest rate policies during his second term. The new chair would inherit the ongoing challenge of reducing inflation, which the Fed has struggled to bring back to its 2 percent target over the past five years.