Dow crosses 50,000 as investors eye Trump-Xi summit

(WASHINGTON) — President Donald Trump’s selection to chair the Federal Reserve, Kevin Warsh, testified in a Senate confirmation hearing on Tuesday as his nomination faces bipartisan opposition centered on a federal criminal investigation into the central bank’s current leader.

The probe into Fed Chair Jerome Powell, which focuses on alleged false testimony to Congress about an office renovation, threatens to derail or delay Warsh’s nomination.

Powell, who was appointed by Trump in 2017, has rebuked the probe as a politically motivated effort to influence interest-rate policy.

In his opening remarks, Warsh voiced support for the independence of the Fed in its role setting interest rates. He used the term “monetary policy” to describe the central bank’s task of adjusting benchmark borrowing costs.

“Monetary policy independence is essential. Monetary policymakers must act in the nation’s interest,” said Warsh, a former Fed official.

Still, Warsh defended the right of public officials, including presidents, to voice their views on interest-rate policy, saying such comments do not infringe on Fed independence.

“Central bankers must be strong enough to listen to a diversity of views from all corners,” Warsh said.

Warsh said he welcomes collaboration with the White House and Congress on “non-monetary matters that are part of the Fed’s remit,” such as banking regulation.

Sen. Elizabeth Warren, D-Mass., the top Democrat on the committee, responded directly to Warsh’s defense of a president’s right to criticize the Fed, saying the federal investigation of Powell amounts to a pressure campaign that extends beyond public criticism of Fed policies.

“You said it’s perfectly fine for elected officials to state their views on interest rates. But that’s not what Donald Trump is doing,” Warren said, addressing Warsh.

The investigation of Powell, Warren added, is “designed to threaten all the members of the Fed to do Trump’s bidding.”

Warsh may become Trump’s “sock puppet” atop the Fed, Warren said.

By contrast, Sen. Tim Scott, R-S.C., the chairman of the Senate Banking Committee, praised Warsh, saying the Fed nominee would focus Fed policy on economic stewardship. During the tenure of President Joe Biden, Scott claimed, the Fed shifted some of its attention to the implications of issues like climate change.

“An independent Federal Reserve is essential to achieving its mission. That independence must be protected,” Scott said.

“Kevin Warsh is battle-tested and brings the necessary experience,” Scott added.

Sen. Thom Tillis, R-N.C., a potentially decisive vote on the committee, says he will not move to advance Warsh’s nomination until the Department of Justice resolves its unprecedented investigation into Powell.

Powell’s term as Fed chair ends on May 15, but he said last month he would stay in the position until Warsh is confirmed. For his part, Trump told Fox Business last week he would fire Powell if the current Fed chair attempts to remain in office past the end of his term.

Warsh, who previously worked on Wall Street and in the President George W. Bush administration, brings experience in finance and policymaking.

He is currently a fellow at a conservative think tank called the Hoover Institution, which is based at Stanford University. He also works as a partner at the Duquesne Family Office, an investment firm founded by billionaire and former hedge fund manager Stanley Druckenmiller.

In 2006, Bush appointed Warsh to serve on the Fed’s Board of Governors, a top policymaking body that helps set the level of interest rates, where he served until 2011. His tenure overlapped with the 2008 financial crisis, during which he helped manage the central bank’s response under then-Chair Ben Bernanke.

The nomination of Warsh arrives at a delicate moment for the Fed, as it grapples with a challenging combination of elevated inflation and sluggish hiring. An interest-rate hike could help ease inflation but risks a further cooldown of the labor market, while a rate cut may boost hiring but threatens higher inflation.

During his term as a Fed governor in the late 2000s and early 2010s, Warsh gained a reputation as an interest-rate “hawk,” meaning he generally preferred higher interest rates as a means of ensuring low and stable inflation.

In recent months, however, Warsh has voiced support for lower interest rates, rebuking the Fed’s concern about inflation risk posed by a flurry of new tariffs issued last year.

Those remarks came before the U.S.-Israeli war with Iran, however, which sent inflation soaring last month.

The rapid acceleration of price increases could complicate interest rate policy at the Fed, which may be reluctant to lower borrowing costs as inflation climbs.

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(NEW YORK) — Stocks tumbled on Monday as oil prices climbed in response to the U.S.-Israeli war with Iran.

The Dow Jones Industrial Average fell 460 points, or 0.9%, while the S&P 500 dropped 0.5%. The tech-heavy Nasdaq inched down 0.2%.

The major indexes recovered some of their earlier losses on Monday, however, after oil price hikes cooled. Oil markets settled amid a meeting among Group of Seven (G7) finance ministers about a possible coordinated release from their respective strategic petroleum reserves.

The G7 announced on Monday its decision to forego a release of reserve oil at this time, but markets appeared to view the group as willing to take such action.

The Dow fell as much as 750 points on Monday morning, before paring some of its losses in the afternoon.

Indexes fell worldwide on Monday as the spike in oil prices rippled through global markets. Tokyo’s Nikkei 225 index plunged 5.2%, while pan-European STOXX 600 index slipped 0.6%.

Oil prices climbed as traders feared a prolonged blockade of the Strait of Hormuz, a trading route that facilitates the transport of about one-fifth of the global oil supply.

U.S. crude oil prices hovered at about $95 per barrel on Monday afternoon, which marked a nearly 5% hike. Since a month ago, oil prices have soared a staggering 50%.

Oil prices climbed as high as nearly $120 per barrel overnight, but retreated after the Financial Times reported G7 finance ministers would meet to discuss a possible coordinated release from their respective strategic petroleum reserves.

After the meeting, oil prices fell further but remained higher than where they stood a day prior.

The average price of a gallon of gasoline in the U.S. soared to $3.47 on Monday from $2.99 a week earlier, AAA said.

In a social media post on Sunday night, President Donald Trump downplayed the rise in oil prices.

“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” Trump said.

Soon after the war with Iran began on Feb. 28, U.S.-Israeli forces killed Supreme Leader Ayatollah Ali Khamenei in Tehran. His son Mojtaba Khamenei was chosen on Sunday to succeed him.

This is a developing story. Please check back for updates.

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(NEW YORK) — A global pandemic that put millions of Americans out of work within days. The highest inflation in four decades. An unprecedented federal criminal investigation.

Fed Chair Jerome Powell faced a succession of crises over his 8-year tenure atop the central bank, which ends on Friday. Powell’s decisions along the way held stakes as concrete as the budgets of everyday Americans and as heady as the political independence of a pillar institution.

President Donald Trump’s Fed Chair nominee Kevin Warsh is set to take the helm, inheriting a resilient economy by some measures, though one suffering from a renewed bout of inflation.

Powell said last month that he would take the unusual step of staying on at the central bank’s 12-person board of governors after his term expires. The move grants Powell a role in interest-rate policy that could last until 2028, though he says he will step down once a Fed inspector general’s investigation into a renovation of the central bank headquarters is closed.

The transition offers an opportunity to look back at Powell’s tenure, which spanned two presidents, three Treasury secretaries and 66 interest-rate decisions.

“You don’t choose your challenges, but you do choose how you respond,” Claudia Sahm, chief economist at New Century Advisors and a former Fed official, told ABC News. “In the end, Powell’s legacy will be judged by those outcomes.”

When Trump nominated Powell to become Fed chair, Trump described him as a “consensus builder” who “understands what it takes for our economy to grow.”

Powell, a former investment banker and Treasury official under President George H.W. Bush, assumed the role in 2018. At the time, the economy was humming, the unemployment rate clocked in at a historically low level and inflation stood just a tick above the Fed’s target rate of 2%.

Powell hiked interest rates four times in his first year, putting strain on the stock market but leaving the Fed in position to stimulate the economy with rate cuts in the event of a slowdown. Policymakers wouldn’t have to wait long.

In the early months of 2020, the COVID-19 pandemic put tens of millions of Americans into lockdown, halting business across industries like restaurants and hospitality, while putting a large swathe of the labor force out of work.

At an emergency meeting in March 2020, Powell slashed interest rates to near-zero levels in an effort to stimulate a battered economy.

“Families, businesses, schools, organizations, and governments at all levels are taking steps to protect people’s health. These measures, which are essential for containing the outbreak, will nonetheless understandably take a toll on economic activity in the near term,” Powell told reporters at the time.

The unemployment rate soared from 4.4% in March to 14.7% in April, U.S. Bureau of Labor Statistics data showed.

To supercharge the recovery, Trump and President Joe Biden enacted economic stimulus meant to support people who’d lost their jobs or faced other hardship. Alongside low interest rates, that spending helped bring about a speedy economic recovery from the downturn.

The COVID-19 recession lasted only two months, making it the shortest in U.S. history, according to the National Bureau of Economic Research.

The speedy recovery vindicated the Fed’s decision to slash interest rates, though it hadn’t been a particularly difficult choice, Alan Blinder, a professor of economics at Princeton University and former vice chairman of the Federal Reserve, told ABC News.

“The dropping of rates to the floor was both necessary and appropriate, and in a real sense, obvious,” Blinder said.

A bout of acute inflation soon took hold, however, emerging as a result of a supply shortage imposed by the COVID-19 pandemic and exacerbated by the Russia-Ukraine war. Powell initially downplayed the price increases, describing them as “transitory.” It proved a consequential mistake — and Powell would later admit his error.

Annual inflation peaked at a 40-year high of 9.1% in June 2022. By then, Powell had begun to ratchet up interest rates and it would continue over the following year. The aggressive series of rate hikes put the central bank’s benchmark rate at its highest level since 2001. The move sent mortgage and credit card rates soaring.

By June 2023, annual inflation had plummeted to 3%, but Americans remained widely dissatisfied with price increases long afterward. Many economists forecast a recession and the type of job losses it typically entails. Fortunately, the downturn never came to pass.

“Inflation stayed high for too long but once it came down, it came down really fast. It came down without creating unnecessary pain in the labor market,” Wendy Edelberg, director of the Hamilton Project and senior fellow in economic studies at the Brookings Institution, told ABC News.

In September 2024, less than two months before the presidential election, the Fed cut interest rates by 0.5%. The decision drew criticism from allies of Trump, who considered the move a potential boost for the economy that would benefit incumbent Democrats. Trump went on to win the election.

Within weeks of his return to the White House, in early 2025, Trump voiced public criticism of Powell, urging him to cut interest rates. The attacks intensified criticism of Powell that had begun in Trump’s first term.

Over the ensuing months, Trump began to slam Powell for cost overruns in a renovation project at the Fed’s headquarters in Washington, D.C. Last July, Trump made the first official trip to the Fed by a sitting president in almost 20 years, donning a hard hat as he toured the renovation with Powell.

The Fed attributed spending overruns to unforeseen cost increases, saying that its building renovation would ultimately “reduce costs over time by allowing the Board to consolidate most of its operations,” according to the central bank’s website.

By January, the Department of Justice had opened a criminal investigation into Powell, ratcheting up an extraordinary clash between the White House and the Fed. It was the first criminal probe of a Fed chair in the 113-year history of the central bank.

The probe centered on Powell’s testimony to Congress last year about the cost overruns. Powell issued a rare video message rebuking the investigation as a politically motivated effort to influence the Fed’s interest rate policy.

“No one — certainly not the chair of the Federal Reserve — is above the law,” Powell said. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”

Trump previously denied any involvement in the criminal investigation. The DOJ moved to drop its criminal probe into Powell last month. Washington U.S. Attorney Jeaninne Pirro said the investigation into the office renovation would be taken up by the Fed’s inspector general.

“The attack on the Fed chair was appalling,” Rebel Cole, a professor of finance at Florida Atlantic University who formerly worked at the Federal Reserve, told ABC News. “Powell stood up to it.”

Warsh, a former Fed official, will serve a 4-year term as chair. He is set to lead the Fed in a challenging period for central bank policymakers.

Inflation rose for a second consecutive month as the U.S.-Israeli war with Iran continued to send gasoline prices surging in April, government data on Tuesday showed. Annual inflation jumped to its highest level in three years, according to the U.S. Bureau of Labor Statistics.

Despite the disruption, some measures of economic health have proven resilient.

The unemployment rate held steady at a historically low level of 4.3% in April, leaving it little changed from when Powell began his tenure in 2018.

“The economy is pretty good but far from perfect,” Blinder said, faulting Powell in part for elevated inflation, while attributing much of the blame to the Iran war. At the same time, Blinder praised Powell for his commitment to the independence of the Fed.

“That’s the legacy that Warsh is inheriting,” Blinder said.

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