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Kevin Warsh Sworn in as Fed Chair as Central Bank Weighs Next Policy Move

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Kevin Warsh Sworn in as Fed Chair as Central Bank Weighs Next Policy Move

Kevin Warsh took charge of the Federal Reserve on Friday, replacing former Chair Jerome Powell amid growing signs of division at the central bank as inflation heats up.

Warsh, who served as a governor on the Fed's board from 2006 to 2011, is US President Donald Trump's pick to lead the institution.

Powell's term as Fed chief expired on May 15, but he'll stay on as a governor for an indefinite period.

Trump has repeatedly criticized Powell for the central bank's cautious view on lowering interest rates, though he said Friday Warsh should remain "independent."

"I want Kevin to be totally independent," Trump said at Warsh's swearing-in ceremony. "Don't look at me, don't look at anybody."

Warsh is taking over a Fed that is increasingly divided, ING said in a note last week.

Three regional Fed presidents supported the April decision of holding rates amid the Middle East conflict, but opposed including an easing bias in the policy statement. Former Fed Governor Stephen Miran, who resigned to make way for Warsh on the Fed's board, favored an interest rate reduction.

"The prospect of headline inflation above 4% this summer and the recent improvement in jobs numbers suggest an extended pause from the (Fed)," ING said. "We still see the potential for the Fed to move the policy rates down towards neutral, but three months later than we previously forecast."

Warsh said the Fed's mandate is to promote price stability and maximum employment.

"When we pursue those aims with wisdom and clarity, independence and resolve, inflation can be lower, growth stronger, real take home pay higher, and America can be more prosperous, and no less important, America's place in the world more secure," Warsh said after being sworn in on Friday.

Unhappy with current inflation measures, Warsh has proposed trimmed averages, which eliminate the biggest moves from inflation data, Stifel said in a note on May 15.

"I will lead a reform-oriented Federal Reserve, learning from past successes and mistakes both, escaping static frameworks and models, and upholding clear standards of integrity and performance," Warsh said.

Warsh has shifted his policy stance to be more in line with the Trump administration's call for rate cuts, "a dovish tilt that is likely to face at least some level of opposition given the rising level of inflation and the notable number of dissents at the latest April FOMC meeting," Stifel Chief Economist Lindsey Piegza wrote.

At that meeting, Fed officials flagged the possibility of higher interest rates if the Iran war dragged on and kept inflation above the 2% goal, minutes from the meeting showed on Wednesday.

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