President Donald Trump’s nominee to lead the Federal Reserve, Kevin Warsh, will appear before the Senate Banking Committee on Tuesday at 10AM ET in what is shaping up to be one of the most politically charged confirmation hearings in the central bank’s modern history.
Warsh, a former Fed governor who has spent years criticizing the institution as directionless and in need of “regime change," now has the chance to outline his vision for remaking the world’s most powerful central bank. But he faces a delicate balancing act: signaling loyalty to Trump’s push for lower interest rates while reassuring markets, lawmakers, and global observers that he will safeguard the Fed’s independence and keep inflation in check.
The hearing arrives against a backdrop of extraordinary tension. Trump has repeatedly attacked current Chair Jerome Powell, attempted to fire Fed Governor Lisa Cook (a move now before the Supreme Court), and backed a Justice Department criminal probe into Powell and the Fed over a $2.5 billion headquarters renovation project. Powell has called the investigation politically motivated.
Markets continue to price in meaningful confirmation risk. As of this writing, Polymarket currently assigns roughly 33% odds that Warsh will be confirmed in time to replace Powell when his term expires on May 15.
//--> //--> //--> Kevin Warsh confirmed as Fed Chair by May 15?ANZ Research expects him to affirm his commitment to the Fed’s independence and resistance to political pressure on rates, while arguing that strong productivity growth - aided by artificial intelligence - and the government’s deregulation agenda are structurally disinflationary forces that could support easier policy over time. Warsh has long described the Fed’s roughly $6.7 trillion balance sheet as “bloated” and views its reduction as central to restoring a sound monetary policy regime.
Warsh, 56, served on the Fed Board of Governors from 2006 to 2011, the youngest person ever appointed to the role at age 35. A Stanford public policy graduate and Harvard Law alum, he previously worked in mergers and acquisitions at Morgan Stanley and as an economic policy adviser in the George W. Bush White House. During the 2008 financial crisis, he acted as the Fed’s key liaison to Wall Street, helping navigate the Bear Stearns and AIG rescues.
After leaving the Fed, Warsh became a vocal critic, arguing the central bank had strayed from its core mandate through over-reliance on complex models, opaque communication, excessive regulation, and a bloated $6.7 trillion balance sheet that distorts markets. He has long called for shrinking that balance sheet to reduce moral hazard and free up resources for the real economy.
His views appeared to evolve in 2025 as Trump’s return loomed and Powell’s term wound down. In July interviews on Fox Business and CNBC, Warsh advocated for rate cuts, citing potential productivity gains from artificial intelligence, deregulation, and housing disinflation. He has argued that aggressive quantitative tightening (QT) could offset the stimulative effect of lower rates, allowing the Fed to ease policy without reigniting inflation.
The Economic Backdrop: Iran War Fuels Inflation UncertaintyWarsh’s testimony comes at a fraught economic moment - as the US-Israel war on Iran has driven a sharp surge in energy prices, pushing up inflation and prompting the Fed to pause further rate cuts after three reductions in late 2025. The federal funds rate currently stands at 3.5%–3.75% - with officials largely expected to hold steady at their next meeting.
Wholesale prices jumped 4% in the latest month, with energy costs up sharply. Fed officials, including Governors Christopher Waller and others, have stressed a “wait-and-see" approach, noting that a swift resolution to the conflict could reopen the door to cuts later in 2026 - but prolonged disruptions risk embedding higher inflation.
Warsh has previously pitched a multi-pronged case for eventual rate cuts centered on productivity surges and balance-sheet reduction. Analysts say he may argue for lower rates a year out while cautioning against premature easing now.
Political Hurdles Cloud Confirmation PathEven as the hearing proceeds, Warsh’s path to confirmation remains uncertain. Sen. Thom Tillis (R-N.C.), a key Republican on the Banking Committee, has repeatedly vowed to block any Fed nominee—including Warsh—until the DOJ probe into Powell is fully resolved. Trump has signaled he wants the investigation to continue.
Democrats are united in opposition. Sen. Elizabeth Warren (D-Mass.), the committee’s top Democrat, met with Warsh last week and emerged with “new concerns," citing incomplete financial disclosures. All 11 Democratic members of the panel have called for delaying the hearing until the DOJ investigations end.
Senator Elizabeth Warren Photographer: Al Drago/BloombergWarsh’s financial disclosures, released earlier this month, show joint assets with his wife, Jane Lauder (of the Estée Lauder fortune), totaling at least $130 million - $192 million or more, depending on valuation ranges. He has pledged to divest conflicting holdings if confirmed, but transparency questions persist.
What to Watch Tuesday
According to Bloomberg, lawmakers from both parties are expected to press Warsh on:
Experts like former Kansas City Fed President Esther George have welcomed Warsh's ideas but stressed the need for clarity to preserve credibility. European Central Bank President Christine Lagarde recently warned that perceived political interference anywhere undermines global central bank trust.
Investors will scrutinize every word for signals on future policy. A misstep - either appearing too deferential to Trump or too dismissive of inflation risks - could roil bond markets and push long-term yields higher. Deutsche Bank chief U.S. economist Matthew Luzzetti noted that Warsh must thread the needle: outline a credible path to lower rates over time while forcefully defending independence. Luzzetti also points out that Warsh's argument for rate cuts is driven by a belief in disinflationary forces from deregulation and AI.
Although we have not heard from Warsh recently, his comments prior to his nomination indicated support for rate reductions based primarily on a forecast that anticipates strong disinflationary forces from deregulation and AI. While we expect he will maintain this narrative about the economy, recent developments have weakened the case for lower rates – labor-market data have stabilized, PCE inflation has surprised to the upside, and the war in Iran poses further upside risks to inflation. -Matthew Luzzetti, DB
Powell’s term ends May 15. Whether Warsh is in place by then hinges on resolving the Tillis standoff and navigating Senate dynamics. Republicans are growing impatient with the delay, with some quietly urging the administration to drop the probe.
Warsh has described the Fed as needing fundamental reform to better serve its dual mandate of price stability and maximum employment. Tuesday’s hearing will reveal whether senators believe he is the right person to deliver it—or whether the institution’s independence will emerge intact from one of its most turbulent periods. The stakes, as one political scientist put it, could hardly be higher.
Tyler Durden Mon, 04/20/2026 - 11:10Trump says 'highly unlikely' will extend ceasefire if deal not signed in Pakistan.
Iran's military after Sunday's US seizure of Iran-flagged cargo ship: will "take the necessary action against the US military"
Vance intends to depart Tuesday to Pakistan, though still unclear whether Iranians will join - Pakistanis say yes, but timeline is fluid. Trump warns "nobody's playing games" & "lots of bombs will go off" if no deal (PBS)
Xi to Saudi crown prince important phone call: "the first time the Chinese leader had called for the reopening of the strategically vital waterway."
* * *
Trump: 'Highly Unlikely' He Extends CeasefireLots of contradictory messaging this morning from Washington, Tehran, and Islamabad. Trump has said he will note open the Strait of Hormuz until a deal is signed (as both sides inside they in effect control the waterway).
Trump has also asserted that it remains 'highly unlikely' that he extends the ceasefire with Iran, at a moment Tasnim reports that "Iran's decision not to participate in the negotiations has not changed until this moment."
'Lots of Bombs Will Go Off' If Ceasefire Ends With No Deal: TrumpPresident Trump says bombs will go off if the ceasefire expires (set to end by Wed April 22), PBS reports. But he also said he doesn't know if Iran is doing the next round of talks but says it is fine if Iran is not at the Pakistan talks. So who does Washington, led by VP Vance's team, plan to talk to... itself? Or it might just plan to keep sending messages to the Pakistanis. The US could also be seeking to 'demonstrate' that the Iranians have simply refused negotiations, and so this will 'justify' bombs away again. Here are the latest Monday statements from Trump given to PBS:
His latest Monday morning Truth Social post, which appears very on the defensive:
Fresh Pentagon data indicates the US blockade has thus far directed 27 vessels to turn back.
Contradictory Reports of Vance TravelSo it seems the second round of talks are actually on, after several recent contradictory headlines concerning Tehran's intent to send a team. As of Monday morning the Iranians have been signaling the cold shoulder, even as Pakistani officials quietly leak that their arrival is expected.
The NY Post freshly reports: "Vice President JD Vance and the US delegation to the peace talks here with Iran are en route to Pakistan and expected to land within hours, President Trump on Monday told The Post — adding that he was willing to meet with senior Iranian leaders if a breakthrough is reached." However, CNN is saying he has not actually departed yet, and may not till Tuesday, as the talks are reportedly being planned for Wednesday.
"We’re supposed to have the talks," Trump said in an interview when asked whether talks or still happening of if they are falling apart. He added: "So I would assume at this point nobody's playing games." According to more:
The president confirmed that a high-level US delegation — including Vice President JD Vance, special envoy Steve Witkoff and adviser Jared Kushner — is already en route to Islamabad for the next round of negotiations.
“They’re heading over now,” Trump said shortly after 9 a.m. EST. “They’ll be there tonight, [Islamabad] time.”
NBC notes that, "Further complicating the picture, different Iranian leaders are sending contradictory messages. The IRGC vowed revenge for the seizing of an Iranian cargo ship yesterday, even as Iranian President Masoud Pezeshkian continued to emphasize diplomacy."
Shipping Traffic Halt LatestAl Jazeera and others have written the strait is at a virtual standstill currently, after the major Sunday incident which saw the US Navy intercept, fire upon, and board an uncooperative ship which was trying to pass the US-imposed blockade. It was an Iranian-flagged ship which was forcibly stopped in the Gulf of Oman, where some dozen US warships have been patrolling.
Just three ships have crossed in the past 12 hours, shipping data indicates. The same publication records that "Oil products tanker Nero, which is under UK sanctions, has left the Gulf and is sailing through the strait, according to satellite analysis from data analytics specialists SynMax and tracking data from the Kpler platform." And: "Two other ships – a chemical tanker and a liquefied natural gas tanker – have also sailed into the Gulf through the critical waterway separately, the data showed."
Reuters: Senior Iranian official says positive efforts have been started by Pakistan to end the US blockade and ensure Iran's participation in talks.
On Monday a spokesman for Iran's military reiterated a threat to "take the necessary action against the US military" after the Sunday US interdiction. He described that that Iran's military exercised restraint over the incident, not taking immediate action, in order to protect the ship's crew, but will act "once it is ensured that the lives of the families and crew of the vessel attacked by the United States are safeguarded." Apparently the crew's family members are accompanying them aboard the vessel, the statement suggests.
⚡️ US military releases footage of “seizure of Iranian ship Touska in Strait of Hormuz” pic.twitter.com/d7qk7G5oeC
— War Monitor (@WarMonitors) April 19, 2026 Important Xi Jinping Statement on HormuzChina's President Xi Jinping on Monday demanded the uninterrupted passage of vessels through the Strait of Hormuz in a phone call with Saudi Arabia's Crown Prince Mohammed bin Salman, state news agency Xinhua reports. He urged the normalization of shipping traffic after about 50 days of disruption which obviously and significantly impacts Chinese oil imports.
"Normal navigation through the Strait of Hormuz should be maintained, this is in the shared interests of regional countries and the international community," Xi said. He called for an immediate, comprehensive ceasefire and insisted disputes be resolved through political and diplomatic means.
South China Morning Post observes that it was "the first time the Chinese leader had called for the reopening of the strategically vital waterway, which has been repeatedly blockaded since US-Israeli strikes on Iran began on February 28." China imported 5.86 million tons of crude oil from Saudi Arabia, down 10% from February, according to customs data released Monday.
Second Pakistan Talks Imminent?After the Sunday dramatic US seizure of the Iranian-flagged ship, Iran's Foreign Ministry has said the country currently no plans regarding a new round of talks, however, it also said it is reviewing the latest Washington proposal related to a second round of Pakistan-hosted talks. With that, by Monday it reasserted that the transfer of enriched uranium out of the country or into US custody has never been on the table. Tehran is insisting that it won't be transferred anywhere.
This firm stance is after President dramatically shifted his tone over the weekend from strangely and surprisingly somewhat praising Iran's leadership (with statements such as the US could work with them and possibly trust them) to once up again ramping up threats, posting "No more Mr. Nice Guy" on social media.
Currently there are conflicting reports on whether the Iranian side will actually be there for reported possible Tuesday talks. Pakistan officials say the timing of the talks remains fluid. According to the latest via Associated Press Iranian authorities have expressed willingness to send a delegation to Islamabad, citing two Pakistan officials. The officials reports "cautious optimism that delegations from both Iran and the United States could travel to Islamabad."
Some confused and conflicting signaling, likely purposely so...
Iran's Foreign Ministry spokesman Esmail Baghaei:
We have no plans for the next round of negotiations. pic.twitter.com/CFb16qt8vM
The NY Times has declared that JD Vance will try again:
The vice president is scheduled to lead an American delegation back to Islamabad, Pakistan, this week for another round of in-person negotiations with Iran after failing to secure a deal just over a week ago.
Whether the talks even occur seems in dispute. Hours after President Trump announced the trip on Sunday, Iranian state media said that Tehran had not yet agreed to any such meeting. Later, Mr. Trump announced that a Naval destroyer had attacked an Iranian-flagged cargo ship that tried to skirt the U.S. blockade on Iranian ports in the Strait of Hormuz.
President Trump has been threatening major escalation should there be no negotiated settlement, at a moment the two sides' position are very distant especially on the nuclear issue.
Zero Sum Positions on Nuclear IssueThe problem, according to University of Chicago Professor Robert Pape is the zero sum logic of it all. "In a matter of a day, the system snapped back to escalation," he wrote over the weekend. "This is not a story about fragile diplomacy or poor sequencing. It is a story about zero-sum conflict, where the core issues cannot be divided, traded, or deferred without forcing one side to accept a strategic loss—a direct contest over relative power."
"At the center of the war is a fact that cannot be negotiated away: Iran either retains a nuclear capability on the threshold of weapons, or it does not," Pape continues. "There is no stable middle ground that satisfies both sides."
POTUS is laying out two courses of action—a negotiated settlement, or a major escalation.
There is a third option, and he should take it: recognize there is no way to force a positive outcome and simply leave.
The region is not ours to fix. President Reagan chose this path in… pic.twitter.com/5ovi05FdwE
And more from the analysis: "The same zero-sum logic applies—more visibly and more immediately—to the Strait of Hormuz. Before the war, Hormuz functioned as a global commons, carrying roughly one-fifth of the world’s oil supply. That assumption is now broken. Iran has demonstrated that it can shift from disruption to conditional control, allowing passage under its terms while restricting or denying access when it chooses. The United States, in response, is attempting to preserve open navigation through blockade and interdiction. But these positions cannot be reconciled."
Tyler Durden Mon, 04/20/2026 - 10:55By Benjamin Picton, Senior Market Strategist at Rabobank
Erwin Schrodinger famously proposed a thought experiment to illustrate the apparent absurdity of quantum mechanics when applied to the macroscopic world. In the theoretical experiment, Schrodinger’s eponymous cat, contained in a box with a radioactive atom, a Geiger counter and a vial of poison, exists in a state of superposition whereby it is simultaneously both alive and dead until the box is opened.
And so it is with the Strait of Hormuz, which exists in a state of both openness and closedness until a ship actually attempts the transit.
On Friday Iranian Foreign Minister Araghchi posted on X that the Strait was “completely open” to all commercial vessels for the duration of the 10-day ceasefire between Israel and Lebanon. Markets reacted swiftly, the S&P500 rose 1.20% to close at a new all-time high and the Brent crude front future fell more than 9% to settle at $90.38/bbl – its lowest weekly close since the war began. Even dated Brent (the physical oil price for immediate delivery) fell by more than 15% to $98.95/bbl – its lowest level since March 11th, which was the immediate aftermath of Trump’s comment that the war in Iran is “very complete”.
The all important dated brent is plunging pic.twitter.com/rPRiOMp0BV
— zerohedge (@zerohedge) April 17, 2026However, the joy of financial markets has now turned to ash in our mouths as the Iranian Revolutionary Guard Corps moved to re-establish (or re-assert?) the closure of the Strait. Several vessels were turned back over the course of the weekend and two were fired upon by the IRGC, prompting the Indian government to summon the Iranian ambassador to protest. Al Jazeera reports that more than a dozen ships attempted to transit the Strait in the brief time that it was open – including 8 successful transits of oil and gas tankers – but shipping had ground to a standstill again by Sunday.
And rejected: the two tankers taking the neutral route, Minerva Evropi and Nissos Keros, have turned around; the Sanmar Herald which appears to be taking the Iran-sanctioned Larak island route is proceeding. https://t.co/aceBI7ki0B pic.twitter.com/gmkM37iA1U
— zerohedge (@zerohedge) April 18, 2026Also on Sunday, the US Navy seized the MV Touska, an Iranian-flagged cargo ship that had been attempting to break the blockade en-route from Gaolan in China to the Iranian port of Banda Abbas. After a 6-hour radio standoff, the USS Spruance fired its main gun to disable the Touska’s propulsion systems before the vessel was boarded by US marines, marking the first known use of force in enforcing the blockade. The Washington Post reports that Gaolan is a known port of origin for sodium perchlorate, the primary oxidizer in solid rocket fuel for Iranian ballistic missiles.
U.S. Marines depart amphibious assault ship USS Tripoli (LHA 7) by helicopter and transit over the Arabian Sea to board and seize M/V Touska. The Marines rappelled onto the Iranian-flagged vessel, April 19, after guided-missile destroyer USS Spruance (DDG 111) disabled Touska’s… pic.twitter.com/mFxI5RzYCS
— U.S. Central Command (@CENTCOM) April 20, 2026Thus, the seizure of the Touska marks a potential point of escalation for both sides. The IRGC has nominated lifting the US blockade as a red line for opening the Strait, which they say would need to be done under Iranian auspices, and the US has threatened secondary sanctions against any country that provides Iran with weapons.
Unsurprisingly, markets this morning are once again repricing the status of the Strait and the diminished prospect for a peace agreement ahead of the expected expiry of the US-Iran ceasefire on Wednesday. Brent crude has opened 7% higher, high beta FX is being sold sharply, and US equity futures are pointing to losses of ~0.8% at market open.
IRGC commander Vahidi is reported to have said that the Strait will open “by order of the [Supreme] Leader, not by the tweets of some idiot” in an apparent reference to Araghchi, highlighting the divisions between the IRGC and the civilian government in Tehran. US Senator Lindsey Graham has summarized the situation succinctly by tweeting “the guy in the suit (Araghchi) is not in charge. It’s the guys with the guns (the IRGC) who are in charge.”
Unfortunately, the US has been negotiating with the guys in the suits. This may be what Donald Trump was referring to when he previously said that regime change has already taken place. This also means that the progress that US negotiators have reportedly made with Iranian chief negotiator Ghalibaf are likely subject to an IRGC veto.
Ghalibaf himself has been issuing defiant tweets over the weekend peppered with oil trading advice and mini tutorials on how to use a Bloomberg terminal to effectively ‘monitor the situation’. One suspects that these are ghost-written by the IRGC in a similar fashion to the proclamations of Mojtaba Khamenei, who still hasn’t been seen since the war started.
Vibe-trading digital oil is like vibe-hedging in treasuries during Hormuz risk-off. Both share one house of cards that works on paper.
Difference: oil at least has Dated Brent. Treasuries? Vibes all the way down.
EUCRBRDT Index GP
With Wednesday’s ceasefire expiry looming as a critical risk event for markets, the Wall Street Journal reports that Vice President J.D. Vance is set to lead a fresh round of peace talks with Iran in Pakistan on Tuesday. Awkwardly, there is no confirmation so far that the Iranians will turn up. Multiple outlets are citing Iranian state media reports that Iran will not be attending the talks due to the unreasonableness of US demands and the ongoing blockade of Iranian ports. Meanwhile, the US has been moving more and more military assets toward the region, including the Gerald R. Ford and George H.W. Bush carrier strike groups.
So, while we have Schrodinger’s Strait we also have Schrodinger’s market where we are simultaneously in the grip of the largest energy shock in history (according to the IEA) with physical shortages of loads of things needed for 21st century life, but this is also incredibly bullish and stock indices remain close to all-time highs.
Wrapping your head around this paradox might approach the impenetrability of quantum mechanics.
Tyler Durden Mon, 04/20/2026 - 10:50