The key political obstacle hindering Kevin Walsh's appointment as Chair of the Federal Reserve has been removed. North Carolina Republican Senator Thom Tillis announced on Sunday that he would withdraw his obstruction of Walsh's nomination.

Written by: Zhao Ying

Source: Wall Street Journal

The largest political barrier to Kevin Walsh becoming Chair of the Federal Reserve has been lifted, and his confirmation process is expected to advance quickly this week.

According to Bloomberg, Thom Tillis, a member of the U.S. Senate Banking Committee and a Republican senator from North Carolina, announced on Sunday that he would withdraw his obstruction of Walsh's nomination, clearing the way for the committee's scheduled vote on the nomination set for April 29.

Previously, the Department of Justice announced the withdrawal of its criminal investigation into current Federal Reserve Chair Powell. Tillis stated that this decision alleviated his core concerns about threats to the independence of the Federal Reserve.

Walsh has broad support among Republican senators, and the Senate Banking Committee has scheduled the nomination vote for April 29. If the committee approves smoothly, the nomination will be submitted for a vote by the full Senate, with widespread expectations that the timing for final confirmation closely aligns with Powell's term expiration on May 15.

Once confirmed, Walsh may initiate significant reforms. In last week's hearing, he called for the abolition of the "dot plot" and a re-examination of forward guidance mechanisms, indicating that the core framework that has underpinned global asset pricing for the past 15 years could face fundamental changes, resulting in a complete restructuring of pricing logic across stock, bond, and foreign exchange markets.

Tillis Withdraws Obstruction, Nomination Vote Set for April 29

Tillis previously held a key vote on the Senate Banking Committee and explicitly committed to blocking Walsh's nomination as long as Powell was under investigation by federal prosecutors. He characterized this criminal investigation as an attack on the independence of the Federal Reserve, believing the intent behind it was to force Powell to resign prematurely.

On Friday, Washington D.C. federal prosecutor Jeanine Pirro announced on social media that she would drop the criminal investigation into the Federal Reserve's renovation expense overruns and Powell's congressional testimony, transferring the review to the Federal Reserve's Office of Inspector General. Tillis subsequently communicated with the Department of Justice and received assurances that the criminal cases against Powell and the Federal Reserve had "completely and thoroughly concluded."

"That was my initial issue because I felt the prosecutors in Washington believed this could become a bargaining chip to force Powell out early," Tillis said in an NBC interview. After receiving assurances from the Department of Justice, he stated he was "ready to advance the confirmation process for Mr. Walsh."

Tillis described Walsh as an "outstanding nominee" in his statement on Sunday and stated, "Now is the time for the Federal Reserve to move beyond this distraction and return its full focus to its mission."

Powell's Future Remains Uncertain, Trump's Stance Leaves Room

Although the confirmation process has accelerated, uncertainty surrounding Powell has not completely dissipated. Powell's term as Chair of the Federal Reserve will expire on May 15, but his term on the Board of Governors continues until 2028, and the Department of Justice's partial withdrawal of cases does not guarantee his departure from the board.

Trump stated on Saturday when pressed by reporters that with Pirro dropping the criminal investigation, Walsh's confirmation path "should be smooth," but he declined to give a "full clearance" statement regarding Powell, citing the ongoing review of renovation costs by the Federal Reserve's Inspector General, stating, "I have an obligation to figure out" the reasons behind the overruns.

This ongoing uncertainty means that pressure from the Trump administration will continue, which may, in fact, become a motivator for Powell to remain on the board—even if Walsh is ultimately confirmed by the Senate.

Walsh Aims to Dismantle Forward Guidance, Asset Pricing Faces "Anchoring" Risks

Walsh's policy positions may be more noteworthy for the market than his confirmation itself.

At the Senate Banking Committee hearing on April 21, he explicitly called for the elimination of the "dot plot"—a chart published once a quarter that contains the interest rate forecasts of 19 FOMC members—and criticized the core PCE as a "rough estimate." He characterized the high inflation from 2021 to 2022 as a policy miscalculation rather than an external shock and refused to commit to maintaining regular press conferences after each FOMC meeting, stating, "The pursuit of truth is more important than repetition." He also hinted at possibly reducing the number of meetings per year but did not provide specific figures.

Walsh's criticism is aimed directly at the forward guidance mechanism—an entire framework through which the Federal Reserve communicates its policy intentions to the market in advance. This system, gradually established by Bernanke after 2008, encompasses calendar-based commitments, conditional commitments, statements interpreted word-for-word by the market, and the dot plot, which has silently become the implicit foundation of global asset pricing over the past 15 years.

If Walsh implements these changes, the core tools that the market relies on to build interest rate expectations will be removed, leading to a decline in certainty premiums, and pricing models across stock, bond, and foreign exchange markets will face systemic re-evaluation pressure.