Powell to Step Down as Fed Chair, Warsh to Take Over with Smaller Balance Sheet Plans

Federal Reserve Chair Jerome Powell announced his departure as chair effective May 15, with Kevin Warsh set to succeed him. Powell will remain as a governor until the Department of Justice investigation into the Fed is fully resolved. The transition marks a shift from Powell's 'ample reserves regime' and mega-QE policies, which expanded the Fed's balance sheet by $3 trillion during the pandemic, to Warsh's preference for a smaller balance sheet. Powell expressed confidence in Warsh's ability to lead and resist political pressure, while warning that attacks on Fed independence threaten its ability to conduct monetary policy free of political influence. Warsh's confirmation hearing before the Senate Banking Committee advanced, and he will need to build consensus among FOMC members to implement policy changes.