The Senate confirmed Kevin Warsh as the next chair of the Federal Reserve on a 54-45 vote on Wednesday.

As he takes the reins, Warsh inherits a Federal Reserve that is cautiously balancing its dual mandate of maximum employment and price stability amid a shaky economy and rising inflationary pressures. While some observers expect the federal funds rate to drop modestly this year, there is no guarantee that mortgage rates will follow.

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From Conflict to Confirmation: How Kevin Warsh Secured the Fed Chairmanship

A former investment banker at Morgan Stanley and finalist for Fed chair in 2017, Warsh previously served on the Federal Reserve’s Board of Governors from 2006 to 2011.

“In some respects, he might have been the most important governor during the financial crisis (of 2008), with the exception of Chairman Bernanke,” says Chester Spatt, professor of finance with Carnegie Mellon University in Pittsburgh. That’s because Warsh had strong ties to Wall Street and the financial markets.

Warsh will replace outgoing Chair Jerome Powell when Powell’s term is set to expire on Friday. Powell will remain on the Federal Reserve Board of Governors.

President Donald Trump has made no secret of his disdain for Jerome Powell, at times referring to him as “crooked,” “incompetent” and “very, very dumb.” The president has been critical of Powell’s leadership, particularly regarding interest rate reductions. Those reductions have been too small and occurred “too late,” according to Trump.

In his April hearing before the Senate Banking Committee, he said he would be an independent Fed chair and that Trump has never asked him to commit to any specific interest rate decision.

Warsh’s nomination faced some initial resistance in the Senate before ultimately advancing. Sen. Thom Tillis, R-N.C., said he would oppose any Fed nominee until the Department of Justice ended its criminal investigation into Powell. The investigation, which centered on the Fed chair’s testimony about the Federal Reserve’s headquarters renovations, was believed by many to be politically motivated. The DOJ closed the investigation on April 24, clearing the way for Warsh to advance.

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Will Fed Chair Kevin Warsh Cut Interest Rates?

When it comes to economic policy, people are often characterized as hawks or doves. Hawks are those in support of stricter monetary controls to avoid inflation. They tend to be more cautious about the interest rate reductions. Doves, on the other hand, may be willing to cut rates and risk inflation if it means better employment prospects.

Traditionally, Warsh has been considered a hawk, but he made comments last year criticizing the Fed for its “hesitancy to cut rates” and expressing sympathy for Trump’s frustration with the body.

When he appeared before the Senate Banking Committee in April, Warsh left open the possibility of rate cuts while emphasizing the Fed’s independence. “Presidents tend to be for cutting rates. President Trump expresses it quite publicly … I do not believe the operational independence of monetary policy is particularly threatened when elected officials — presidents, senators or members of the House — state their views,” Warsh told the committee.

However, observers say that Warsh would likely be attuned to the president’s economic priorities.

“Anyone who was going to be selected by President Trump had to, at a minimum, signal an openness to rate cuts,” Spatt says.

“He’s not going to surprise the president in a negative way,” according to Mark Charnet, founder and CEO of advisory firm American Prosperity Group in Sparta, New Jersey. “I think like the president does, that he’s going to lower rates.”

Fed Rates Forecast 2026: Modest Interest Rate Reductions Possible

Even if Warsh supports interest rate cuts, he doesn’t get to make decisions unilaterally. The Federal Open Market Committee sets the federal funds rate, and there are 12 members on that committee.

With inflation remaining “sticky,” Spatt says, “I think it’s going to be difficult to be persuasive to the Open Market Committee.”

Recent geopolitical shocks that raised oil prices have exacerbated inflation, which jumped from 2.4% in February to 3.8% in April, according to data from the Bureau of Labor Statistics. If the job forecast weakens, it could bolster support for future rate reductions.

“I personally think the Fed will cut two times in 2026,” says Christopher Hodge, chief U.S. economist with Natixis CIB Americas, although he doesn’t think there will be any significant change in Fed policy immediately after Warsh takes over.

Any reduction to the federal funds rate is likely to be modest. “I don’t think it’s going to come down fast and furious,” Charnet says. “It will come down slow.”

Why Fed Rate Cuts Don’t Always Mean Lower Mortgage Rates

While many people assume Federal Reserve rate reductions will lower the cost of mortgages, there is no guarantee. The Federal Reserve controls only the federal funds rate, which banks use for overnight lending. While other interest rates, such as those for credit cards and mortgages, often follow suit, they are not tied directly to the federal funds rate.

“If the Fed moves too aggressively, it won’t necessarily translate to lower mortgage rates,” Spatt says.

He points to a 50-basis-point cut enacted in September 2024. That rate reduction was larger than expected, and Spatt says long-term mortgage rates actually rose because the market viewed the Fed’s action as inflationary.

There are other ways Warsh’s leadership could influence mortgage rates. For instance, he was critical of the Fed’s large purchases of mortgage bonds during his earlier term on the Federal Reserve Board of Governors. The Fed has since released many of those holdings, but some speculate that Warsh might want to reduce them further. Doing that runs the risk of raising mortgage rates, though.

“You’re going to have to have buy-in from the rest of the committee,” Hodge notes. He says Powell has had remarkable success in securing swing votes when needed, and it remains to be seen whether Warsh can do the same.

The bottom line for homebuyers is that no one expects mortgage rates to free fall now that Warsh is in charge of the Federal Reserve. However, Warsh’s remarks suggest an openness to gradual cuts, and the Fed will likely approve rate reductions under his leadership.

“We won’t see 3% (mortgage rates) again for a long time, but it’s nice to know that rates are going down,” Charnet says. He thinks that might be enough to get people off the sidelines.

When it comes to affordability, mortgage rates are only part of the picture. If rates dip enough to encourage current homeowners to consider moving, that could open up new housing inventory and, in turn, help stabilize or reduce prices in some markets.

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Kevin Warsh Set to Lead the Fed: Why a Trump-Backed Chair Doesn?t Guarantee Lower Mortgage Rates originally appeared on usnews.com

Update 05/13/26: This story was previously published at an earlier date and has been updated with new information.