Fed Chair’s Swearing-in: Uphold Independence to Ensure Price Stability

Editorial

16:48 JST, May 24, 2026

Kevin Warsh has taken office as the new chair of the U.S. Federal Reserve Board at a time when the Fed’s independence is under unprecedented threat.

The challenge of steering monetary policy is becoming extremely difficult, made more so by the risk of a resurgence of inflation amid the turmoil surrounding Iran. The hope is that the Fed will uphold its independence to contribute to the stability of not only the U.S. economy but also the global economy.

Warsh was sworn in before U.S. President Donald Trump at the White House, marking the start of the new chairmanship. Warsh will lead discussions beginning with the June meeting of the Federal Open Market Committee.

It is a tradition for the swearing-in ceremony to take place at the Fed’s headquarters. It is said that this is the first time in about 40 years since 1987, when Alan Greenspan took office, for the ceremony to be held at the White House. The move appears to reflect how strongly Trump wanted this appointment.

Warsh, who said he would “lead a reform-oriented Federal Reserve,” will face three major thorny challenges: ensuring the entity’s independence, curbing inflation and mending internal rifts within the Fed.

As inflation eased at the start of the year, many predicted that there would be roughly two rate cuts in 2026. However, partly due to the impact of the Trump administration’s high tariff policy, prospects for near-term rate cuts have receded.

Furthermore, the situation has changed dramatically due to the Middle East crisis. Crude oil prices have soared, accelerating inflation. Although the Fed has kept its policy rate at 3.50% to 3.75% since last December, there is a growing view that its next move will be a rate hike.

Trump, who has consistently pressed hard for rate cuts, said he wanted Warsh to be “totally independent,” showing a stance of respecting the new chairman for the time being.

However, given that Trump’s words and actions are difficult to predict, it is foreseeable that friction over monetary policy will intensify in the future. Warsh’s skills in dodging pressure from Trump will be put to the test.

To avoid political pressure to ensure independence, Warsh must earn the public’s trust above all else.

Former Fed Chair Jerome Powell misjudged the inflation resulting from the COVID-19 pandemic as “transitory,” leading to a sharp rise in prices and fueling public distrust. It is hoped that Warsh will deeply analyze price trends and avoid repeating the same mistakes.

Discord within the Fed is also a serious issue. Three members dissented against language in the previous meeting’s statement that hinted at future monetary easing. It will be crucial for Warsh to carefully navigate the building of consensus.

Meanwhile, for Japan, if rate cuts by the Fed are put off, the interest rate gap between Japan and the United States will not narrow, adding pressure for a weak yen and a strong dollar. It is vital for Japan to closely monitor the Fed’s moves and review the nation’s fiscal and monetary policies accordingly.

(From The Yomiuri Shimbun, May 24, 2026)