With Senator Thom Tillis withdrawing his objection over the weekend following the Department of Justice’s decision to wind down its investigation into Jerome Powell, Kevin Warsh’s confirmation as the next chair of the Federal Reserve now appears all but certain.
The U.S. Senate Banking Committee is scheduled to vote on Wednesday, April 29, with full Senate consideration expected to follow swiftly. Barring a late-stage surprise, Warsh is set to preside over his first Federal Open Market Committee (FOMC) meeting on June 16–17.
Markets have absorbed the news with little reaction. Fed funds futures continue to assign near-certainty to a hold at this week’s FOMC meeting, with at most one quarter-point cut priced in over the balance of 2026. A Reuters poll of 103 economists shows a majority expecting rates to remain in the 3.50 to 3.75 per cent range through September, while JPMorgan Chase has gone further, sketching a flat path through year-end and a possible hike in early 2027. The implication is clear: investors anticipate evolution at the Fed, not revolution.
Warsh himself has signalled as much. In his April 21 confirmation hearing, the nominee was emphatic that he would not function as the President’s “sock puppet,” but was equally clear that he intends what he described as “regime change” in process, if not in destination.
Three themes stand out. First, a meaningful retreat from forward guidance, which Warsh views as a crisis-era tool that has become a self-imposed constraint on policy flexibility. Second, continued progress toward a leaner balance sheet. It is currently just under $7 trillion, down from a 2022 peak above $8 trillion, but still nearly nine times its pre-2008 level. Third, a narrower institutional remit, with the central bank pulling back from commentary on climate, diversity and other adjacent issues in favour of its statutory dual mandate of maximum employment and price stability.
The most consequential intellectual marker, however, may be Warsh’s preference for trimmed-mean inflation measures over the Fed’s traditional core Personal Consumption Expenditures (PCE) benchmark. Both the Dallas and Cleveland Feds publish such measures, which strip out the most extreme monthly price movements at either end of the distribution. The Dallas Trimmed Mean PCE excludes roughly the top 31 per cent and bottom 24 per cent of components by weight.
By Warsh’s preferred measure, the underlying inflation trend looks distinctly more benign. The trimmed mean reading was near 2.3 per cent in February, compared with core PCE closer to 3 per cent.
Supporters argue this provides a more honest signal once the noise of tariffs and energy shocks is filtered out. Critics, however, say it risks appearing that the goalposts are being moved at a politically convenient moment. They also note that components typically excluded from core measures could, under a trimmed framework, still swing the dial intermittently in either direction.
The broader policy calculus remains finely balanced. Tariffs and the conflict in Iran have nudged headline inflation higher, even as the underlying disinflationary trend remains intact. At the same time, a labour market that has slowed without breaking continues to argue against pre-emptive easing.
Two key questions remain. Will Jerome Powell stay on the FOMC after stepping down as chair, providing Warsh with the ballast of an experienced voice? And how will the Supreme Court rule on the attempted removal of Governor Lisa Cook — a decision that could reshape the legal and political architecture underpinning Fed independence in real time?
For investors, the takeaway is straightforward. The destination of monetary policy in 2026 appears broadly unchanged. The route, the rhetoric, and the analytical framework guiding it may not be.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
The Ontario housing market has moved through one of its most dramatic cycles in years, from a pandemic-era surge to a sharp correction driven by rapidly rising rates.
But are we now seeing early signs of stabilization?
The latest Housing Affordability Watch looks at supply dynamics, investor behaviour, and shifting buyer sentiment to understand where the market may be heading next.
Read the full analysis: https://thecmigroup.ca/press-room/has-the-ontario-housing-market-found-the-bottom/
Independent Opinion
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