April 7 (Reuters) – Federal Reserve Bank of New York President John Williams said on Tuesday that U.S. Federal Reserve Chair Jerome Powell would remain in charge of the central bank’s key monetary policy function even if Kevin Warsh has not been confirmed as the new Fed leader by next month.
“There’s no issue of continuity. There’s no issue of anything” when it comes to the leadership of the central bank’s interest-rate-setting Federal Open Market Committee, Williams said on Bloomberg’s television channel.
Williams was commenting on the unsettled succession process for Fed leadership. U.S. President Donald Trump this year named Warsh, a former Fed governor once known for his hawkish views on monetary policy, to succeed Powell when his term as leader concludes in May.
INVESTIGATION COMPLICATES TRANSITION
There has been little formal movement to get Warsh in place to take over from Powell, which means time for a seamless transition is running out. The outlook is further complicated by a legal investigation the Department of Justice has directed at the Fed and Powell.
That widely criticized investigation into cost overruns for Fed headquarters renovations has driven a key Senate Republican to say Warsh will not be confirmed until the probe is resolved. With the Trump administration vowing to press forward regardless, the investigation has increased the odds Warsh will not be confirmed by the time Powell’s term as chair ends.
Powell has said he will remain chair until a new leader is confirmed, a position that is grounded in central bank history. “If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem,” Powell said after the mid-March FOMC meeting.
Powell, who also holds a Fed governor term that extends until 2028, said he would serve out the governor role “until the investigation is well and truly over with transparency and finality.”
DUAL ROLE
Further complicating the situation is the fact that while the Fed chair and the FOMC chair have always been the same person, the FOMC chair is technically voted on by central bank officials. For some, that has created uncertainty as to who will serve as the key voice setting interest rate policy.
“Typically, we have this vote in January for the chair of the FOMC and, or if, a new chair is confirmed by the Senate, then that person becomes the chair of the FOMC,” Williams said. The New York Fed president serves as vice chair of the FOMC and runs the bank responsible for implementing monetary policy.
“The most important thing here is that … we’re just focused on doing our work,” Williams said.
The central banker had some favorable words for Warsh, as some observers worry the chair nominee could be unusually deferential to a president who has pressured the central bank for lower interest rates.
Warsh “understands the Federal Reserve very well” as a former central banker, and “he has a keen understanding of what our mission is, and the importance of what we do,” Williams said.
“I haven’t spoken to him lately, but I do expect that when he does get confirmed by the Senate, that he will share his views and perspectives as he thinks about … what he wants to accomplish as chair,” he said.
(Reporting by Michael S. DerbyEditing by Rod Nickel)
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