$6.71 trillion. That is the size of the Federal Reserve's balance sheet as Kevin Warsh takes the podium for his first press conference as chair on June 17 [1]. The benchmark rate decision, hold steady at 3.50%-3.75%, is already baked in [1]. The balance sheet is not.
The Federal Open Market Committee meets June 16-17, and markets expect no change to the rate range where policy has sat since December [1]. Inflation runs more than one percentage point above the Fed's 2% target [1]. The question is not whether Warsh will move rates this week. The question is whether he will signal how fast he intends to shrink the $6.71 trillion portfolio [1].
Warsh sketched plans to lower the balance sheet during his years at Stanford University's Hoover Institution [1]. He served as a Fed governor from 2006 to 2011 [1], a tenure that spanned the financial crisis and the first wave of quantitative easing. His writings since then have criticized the tools the Fed built in response: detailed forward guidance, the dot-plot chart of rate expectations, ventures into climate policy [1]. He prefers central banks avoid the commitments that detailed guidance entails [1].
The constraint is arithmetic. Warsh needs broad consensus among his 18 fellow policymakers to change the Fed's communications tools [1]. Jerome Powell elected to remain on the FOMC despite no longer serving as chair; his term as governor runs until January 2028 [1]. Any shift in the pace of balance-sheet drawdown requires a committee vote. Any abandonment of the dot plot, which the FOMC is scheduled to publish at this meeting under the every-other-meeting cadence [1], requires the same.
The inflation backdrop makes the balance sheet question urgent. Trump administration tariff hikes have triggered price shocks [1]. Recent Fed regional district reports hinted at building wage pressures [1], and the labor market sits close to full employment [1]. The improvement in inflation from slowing rent prices may have run its course [1]. Fixed-income markets see a potential rate hike at some point in September or later, not the cuts that were priced in six months ago [1].
Warsh took the oath of office on May 22, administered by Supreme Court Associate Justice Clarence Thomas [1]. He succeeded Powell, who served as chair for eight years [1]. The Senate confirmed Warsh by a 54-45 vote split along party lines [1], for a four-year term as chair and a 14-year appointment on the rate-setting board [1]. His first press conference will follow immediately after the June 17 policy meeting concludes [1].
The balance sheet peaked above $9 trillion during the pandemic. It has been shrinking since mid-2022, at a pace Powell's Fed set and Warsh's Fed has not yet altered. Whether Warsh defends that pace or signals acceleration will tell markets more about his inflation strategy than any statement about the June rate hold. Whether he uses the dot plot he has spent years criticizing, one more time, because the schedule calls for projections this week, will tell them whether he intends to spend political capital on process or save it for policy.
Powell's term as governor runs until January 2028. Warsh's term as chair: four years [1].
That means Powell could outlast Warsh on the board itself, an unusual dynamic that adds a layer of complexity to Fed governance and could shape the committee's internal deliberations well into the next decade. For now, all eyes are on whether the new chair will chart a different course on the balance sheet, or simply inherit the trajectory his predecessor set in motion.
