Jerome Powell’s second four-year term as chair of the Federal Reserve expired on Friday. He did not leave the chair. The Federal Reserve Board announced at midday that Powell would serve as chair pro tempore until Kevin M. Warsh is formally sworn in. The Senate confirmed Warsh on Wednesday by a 54-to-45 vote, the closest margin for a Fed chair in the modern era. His paperwork is awaiting final signatures from the White House.
The pro tempore arrangement is, on its face, procedural. The Federal Reserve Board called the move “consistent with past practice during similar transitions between chairs.” What is not procedural is the second half of Powell’s plan: he intends to remain on the Board of Governors as a sitting governor, a seat that does not expire until 2028. Fed chairs typically leave the central bank when their chairmanship ends. Powell has said he plans to stay on at least until the Justice Department concludes a probe into the Fed’s headquarters renovation.
The numbers Warsh inherits
Warsh’s first scheduled meeting as chair is the Federal Open Market Committee gathering on June 16 and 17. He inherits a price picture that has worsened sharply in two months. The Bureau of Labor Statistics reported on Monday that the Consumer Price Index for All Urban Consumers rose 0.6 percent in April and 3.8 percent over the 12 months ending April. That is the highest annual headline reading since May 2023. Core CPI, which strips out food and energy, rose 0.4 percent for the month and 2.8 percent over the year. Energy alone rose 3.8 percent in April and accounted for more than 40 percent of the monthly all-items increase; energy is up 17.9 percent over the past year. Shelter, the largest single line in the basket, rose 0.6 percent in April.
For working households the consequence is direct. Real average hourly earnings (pay adjusted for the same CPI) fell 0.5 percent from March to April for all employees, and are down 0.3 percent over the past 12 months. Production and nonsupervisory workers, the BLS category that excludes managers, saw their real hourly earnings fall 0.3 percent for the month on a 0.7 percent jump in CPI-W, the urban-wage-earner index. The dollar value of real average hourly earnings in April was $37.41, against $36.12 in April 2025. The nominal pay raise existed; inflation took it.
Real average hourly earnings decreased 0.3 percent, seasonally adjusted, from April 2025 to April 2026. — Bureau of Labor Statistics, Real Earnings — 2026 M04
What Warsh has said he wants to change
Warsh, 56, served as a Fed governor from 2006 to 2011 and has spent the years since as a public critic of the central bank. In a CNBC interview last year he called for “regime change” at the Fed. During his confirmation hearing, he told Senator Lisa Blunt Rochester that the phrase referred to “policy regime change,” not personnel, and specifically to narrowing the Fed’s public communications. The dot plot, the quarterly Summary of Economic Projections that shows where each FOMC participant expects rates to go, has been a particular target. Warsh has argued that the volume of forward guidance has made it harder for officials to change course when conditions warrant.
Markets have already begun pricing the transition. As of mid-week, fed funds futures implied a 74.5 percent probability that the policy rate would remain unchanged through the rest of 2026, a 14.9 percent probability of a hike, and a 10.6 percent probability of a cut. That is a flatter distribution than markets carried a month ago, when cuts were the modal bet.
Two chairs, one Board
The unusual element is not the pro tempore designation — Marriner Eccles served in a similar holding capacity in 1948 — but Powell’s decision to remain a governor after the chair handoff completes. A sitting former chair on the Board changes the working dynamic of the FOMC. Governors vote on every meeting; regional reserve bank presidents rotate. Powell’s policy preferences, expressed in the room, will continue to carry weight on the committee Warsh chairs. Powell told reporters last month he does not intend to operate as a “shadow chair,” but the two have publicly disagreed on the path of rates for the better part of a year.
Retail spending, meanwhile, kept growing in the most recent monthly print. The Census Bureau’s advance estimate, released Thursday, put April retail and food-services sales at $757.1 billion, up 0.5 percent from March and up 4.9 percent from April 2025. The composition told a tighter story: nonstore retail grew 11.1 percent year over year, restaurants and bars grew 2.7 percent, and gas-station receipts rose with pump prices. Households are still spending; what they are spending it on, and where they are cutting, has shifted toward essentials and away from durable goods.
Warsh will preside over his first FOMC vote in a month. Between now and then, the May employment report and the May CPI release land on the public calendar. Both will arrive while Powell is still, technically, the chair.