Fed Leadership Transition Hits Impasse as Resurgent Inflation and Iran War Threaten Rate-Cut Hopes

The Federal Reserve controls dollar interest rates and global liquidity, making its leadership transition consequential for U.S. stocks, bonds and Bitcoin. After Jerome Powell's term expired on May 15, 2026, he briefly remained as interim chair. By the time Kevin Warsh took over, the war in Iran had driven up oil prices and pushed inflation further from the 2% target, weakening the outlook for rate cuts and risk assets.

The U.S. Senate confirmed Warsh by a 54–45 vote on May 13, and he was sworn in as Fed chair on May 22, ending the transition impasse. The U.S. Commerce Department reported on May 28 that April PCE inflation rose 3.8% from a year earlier, while core PCE increased 3.3%. The nationwide average gasoline price climbed from $2.98 a gallon before the war to $4.43, pushing expectations for a rate increase above those for a cut.