(Bloomberg) -- When Kevin Warsh hosts his first meeting as the new chair of the Federal Reserve, he'll face an immediate dilemma: Stare down White House demands for immediate interest-rate cuts, or stare down fellow policymakers who remain skeptical of the need to ease.
The unusual starting place raises the possibility that Warsh may eventually be forced to cast a dissenting vote against his colleagues to make his case heard.
Ordinarily, the idea of a Fed chair breaking from a consensus decision at the central bank would be almost unthinkable. Paul Volcker in 1986, G. William Miller in 1978 and Marriner Eccles in the late 1930s were the only chairs to have dissented against the majority view on a policy decision.
But these aren't ordinary times.
This week alone saw three officials disagree with the dovish tone of the Fed's policy statement, and another who voted against the decision to hold rates steady, making it the first time since October 1992 that four officials dissented. Two of those officials released statements Friday saying they had wanted the Federal Open Market Committee to include language signaling the next rate move could be a hike.
President Donald Trump, who nominated Warsh for the Fed role, has been scathing in his criticism of the central bank for not cutting fast enough. He's also threatened criminal investigations, lawsuits and the firing of Fed officials.
Warsh won the race for Fed chair partly through sketching out a road map to rate cuts on the premise that an AI-driven productivity boom would keep inflation low. He's also proposed that shrinking the Fed's $6.7 trillion balance sheet would leave space for lower interest rates. In his confirmation hearing, Warsh even floated a new inflation framework, though he gave few details on what that would look like.
It's not impossible that Warsh enjoys a honeymoon period in which his new colleagues grant him a near-term cut, said Jon Faust, a former special adviser to Powell. Warsh's first policy meeting will be June 17-18.
But, Faust cautioned, it's just as likely his new colleagues will be dead set against that. "In that case, he will only have terrible options," he said.
The Fed's benchmark rate is currently in a range of 3.5% to 3.75% and investors see it staying there well into 2027.
A decision by Warsh to vote against fellow policymakers would be laden with risk. It could antagonize the very people he's hoping to win over and damage his credibility among investors. The outgoing chair, Jerome Powell, was accused several times by commentators of having "lost control" of the FOMC when rate decisions he led generated repeated dissents.
A Warsh dissent could also send a message to the White House that the new chair is unable to deliver the lower rates Trump is calling for. That may make it more likely that Warsh will, at first, attempt to build consensus for a rate cut.
His dovish case would be bolstered if there were renewed weakness in the labor market, or if inflation starts to show clear progress toward the Fed's 2% target. Yet those aren't the signals the economy is currently sending.
Economic growth accelerated at the start of the year, and the Fed's preferred measure of inflation — the personal consumption expenditures price index — rose 0.7% last month, the most since 2022, as the Iran war sent fuel costs soaring.
Family Fight
Before the war, markets were betting the Fed was on a glide path to another half percentage point of rate cuts before the end of 2026. The energy shock has torn up that outlook. Powell this week warned the oil-price surge brought about by the war hasn't yet peaked, and the broader outlook remains highly uncertain.
"Based on how the labor-market data are evolving, coupled with elevated inflation readings, the data do not support a cut in the near term," said Stephanie Roth, chief economist at Wolfe Research.
Still, that may not stop Warsh from trying. The incoming Fed chair, who is on track for final confirmation in the Senate by the middle of May, told lawmakers he'd like Fed policy meetings to be more contentious, with robust disagreements allowed.
"I tend to favor messier meetings than some, where people don't show up with rehearsed scripts but we can have a good family fight," Warsh said, clearly indicating that not every decision will be made by consensus.
Depending on how the economy evolves, a majority of policymakers might yet swing Warsh's way, said David Seif, chief economist for developed markets at Nomura. But the new chair might also decide to go his own way.
"I certainly could envision a situation where he eventually does dissent," Seif said, adding that would be "totally unprecedented in modern Fed history."
Trump, and his Treasury Secretary Scott Bessent, have sent mixed signals in recent weeks over what they'll tolerate. While Bessent has said the Fed has scope to remain on hold given the impact of the war, Trump has made it clear he'd be disappointed if rates aren't cut immediately.
Stephen Myrow, who runs Beacon Policy Advisors and, like Warsh, worked in the George W. Bush administration, said the option for Warsh is either to act as a heat shield for the rest of the FOMC or to protect his relationship with the White House.
"He is in a tough situation," Myrow said. "It's a question of how long Trump will give him."
(Updates with officials' statements over April 29 dissents in fifth paragraph.)
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