Kevin Warsh, President Trump’s nominee to lead the Federal Reserve, cleared a critical procedural vote in the Senate Banking Committee on Wednesday, advancing to a full Senate confirmation expected before Jerome Powell’s chairmanship expires on May 15. The 13-11 party-line vote ended a weeks-long logjam that had threatened to leave the central bank without a successor until the Department of Justice dropped its criminal investigation into Powell last week, prompting Republican Senator Thom Tillis to drop his objection. Warsh, a former Fed governor and financier, now faces a floor vote where a simple majority is required, a formality given Republican control of the upper chamber.

Viewed from Washington, the succession marks the culmination of a bitter confrontation between Trump and Powell over interest rates that reshaped the political landscape around central bank independence. From across the Atlantic, analysts in London note that the transition arrives at a precarious moment: the Fed’s policy-setting committee voted unanimously to hold its benchmark rate at 3.5-3.75 percent for a third consecutive meeting, as inflation — driven sharply higher by the Iran war and the closure of the Strait of Hormuz — rose to 3.3 percent in March. The decision, widely anticipated by markets, will almost certainly stand as Powell’s last as chair.

In his final press conference, Powell acknowledged that inflation is “moving slightly in the wrong direction,” reaching levels not seen since May 2024, and stressed that rate cuts would require sustained evidence of easing price pressures. Yet beneath the surface calm, the meeting exposed deep fractures within the Federal Open Market Committee: three dissenting members favoured removing the statement’s hint at future reductions, while a fourth, Stephen Miran, argued for an immediate cut. It was the most dissents since October 1992, underscoring the ideological and economic divisions that Warsh will inherit.

Powell, for his part, announced he will remain on the Fed’s board of governors after stepping down as chair, pledging to keep a low profile but vowing to stay at least until an inspector general’s investigation into a renovation project is concluded. That decision sets the stage for an unusual — and potentially fraught — dynamic, with a former chair still seated at the table as his successor takes command. Looking ahead, markets and policymakers are bracing for uncertainty.

The oil shock from the Gulf conflict continues to cloud the inflation outlook, and with the Fed’s balance sheet having doubled under Powell and unemployment edging up, Warsh will face pressure to deliver the rate cuts Trump has openly demanded — while preserving the institution’s credibility. In Frankfurt and Tokyo, central bankers are watching closely: the precedent of a president forcing out a Fed chair and securing a more pliant successor could reverberate far beyond America’s borders.