Trump Wants Rate Cuts. His Own Policies May Prevent Them.

President Donald Trump has long urged the Federal Reserve to slash interest rates in an effort to boost the U.S. economy, but the war in Iran and the knock-on effects for the U.S. have complicated this ambition-and the task of his pick to lead the central bank.

On April 29, members of the Senate Banking Committee voted 13-11 to advance Kevin Warsh's nomination, ahead of incumbent Chair Jerome Powell's term ending on May 15. This sets the stage for full Senate confirmation vote, expected to occur as early as next week.

Some lawmakers have expressed concerns that Warsh could act in Trump's interests and lower rates faster than economic conditions would allow, but experts believe resurgent concerns about inflation in the U.S. could limit his scope for action.

Why It Matters

The Fed delivered three consecutive rate cuts toward the end of 2025, though Trump has criticized the central bank for failing to do so at the speed or scale he desires-maintaining that this is a key impediment to further economic growth. Much of the criticism has been leveled against the Fed chair, whom Trump has repeatedly called "too late Powell."

While Warsh was regarded as relatively hawkish during his tenure on the Fed's Board of Governors, his nomination has been viewed by some as a means of placing a more Trump-accommodating figure at the helm of monetary policy in the U.S.

Economic growth remains "solid," Powell said in a recent press conference, but the U.S. continues to grapple with a slowdown in the labor market and now an uptick in inflation because of the war and related energy supply disruptions, leaving analysts divided on the argument for the cuts Trump has demanded.

Will Warsh Cut Rates?

Trump has expressed hope that Warsh will swiftly move to cut the federal funds rate-which impacts borrowing of all kinds from mortgages to car loans-telling reporters last week that it would be a "good time to lower” it.

"We’re the most prime country anywhere in the world," Trump said. "We’re right now having investments made in our country at a level that nobody’s ever seen."

A week prior, Trump told CNBC he would be disappointed if Warsh did not push for lower rates upon confirmation, later adding that the U.S. "should have the lowest interest rate in the world."

Warsh, who served on the Fed's Board of Governors from 2006-2011, has in recent years advocated for looser monetary policy, arguing that productivity gains from artificial intelligence could permit it without stoking inflation.

During his Senate hearing in April, Warsh also sought to dissuade concerns from lawmakers that he would act on behalf of the president if confirmed, stating his commitment to “ensuring that the conduct of monetary policy remains strictly independent.”

"The president never once asked me to commit to any particular interest rate decision, period," he told the Senate Banking Committee. "Nor would I ever agree to do so if he had, but he never did."

New York University economics professor Mark Gertler told Newsweek:"I am hopeful that in the end, Warsh will care more about his legacy as Fed chair than pleasing Trump, though his unwillingness to acknowledge [that President Joe] Biden won the [2020] election was concerning."

And while Fed chairs set the agenda and shape consensuses within the central bank, Gertler said that the structure of its policymaking system-in which the chair holds the same voting power as the other 11 members of its Open Market Committee-would also limit any outsized influence should Warsh push for lower rates in line with Trump's wishes.

"Without a sound case for his policy recommendations, he is going to have a difficult time," he said.

Iran War Complicates Path to Rate Cuts

Aside from any deference he may display toward the president, experts believe Warsh may be equally hamstrung given resurgent fears over rising prices.

The annual headline inflation rate rose to 3.3 percent in March from 2.4 percent in February and jumped to 0.9 percent from 0.3 percent month-over-month, according to the latest report from the Labor Department. This was largely driven by spiking energy costs caused by the Iran war and the blockade Tehran has placed on the Strait of Hormuz.

This passageway, which accounted for around one-quarter of the world’s seaborne oil trade prior to the conflict, remains largely impassable, though some vessels have been able to transit in recent days under U.S. military escort. Oil and gas costs have risen to multiyear highs as a result.

Powell last week said these circumstances had pushed up inflation expectations in the near term, and experts said the effects could linger long after the war ends. According to research from the Dallas Fed, the blockade-which the U.S. has joined-could push headline inflation up materially through 2026 and into next year.

These concerns were on the mind of Fed officials going into last week’s policy meeting, at which they left interest rates unchanged while citing a “high level of uncertainty about the economic outlook” caused by the war.

Matthias Meier, economics professor at the University of Mannheim in Germany, told Newsweek that easing in these circumstances would prove "risky" and could exacerbate inflation to such an extent that "the Fed might have to tighten aggressively to bring inflation back down."

This position was recently echoed by Treasury Secretary Scott Bessent, who said that the Fed could afford to maintain its "wait and see" stance and hold rates steady until the economic fallout from the war is better understood.

And Gertler said that Warsh, regardless of any alignment with Trump, will not want to be known as "the Fed chairman who unleashed inflation, which makes me think he is not going to do anything [too] crazy."

What Happens Next

Warsh's chances of being confirmed have risen in recent days, after the Department of Justicedropped its probe into Powell over the cost of renovations to the Fed's D.C. headquarters-an investigation that prompted criticism from several lawmakers who said they would block the nomination as a result. Jeanine Pirro, U.S. attorney for the District of Columbia, has said the investigation will be carried forward by the central bank's inspector general.

Powell said he will remain on the Fed’s board once his term ends on May 15-a rare move for an outgoing chair-and until "this investigation is well and truly over with transparency and finality."

The Fed is expected to leave rates unchanged at its next policy meeting in mid-June, according to the CME FedWatch tool, which currently places the odds at 92 percent based on prices from 30-Day Fed Funds futures contracts.

2026 NEWSWEEK DIGITAL LLC.

This story was originally published May 7, 2026 at 5:00 AM.