Warsh Confirmed as Fed Chair, Launches Aggressive QT on $6.7T Balance Sheet

Kevin Warsh assumed the Fed chair on May 15 after Senate confirmation, immediately signaling plans for rapid quantitative tightening and a looser inflation framework. This marks a sharp break from Powell’s gradual QT, with analysts warning the accelerated runoff of the $6.7 trillion balance sheet will lift Treasury yields, tighten financial conditions, and pressure the richly valued S&P 500 trading near 7,400. The shift coincides with Iran-driven energy shocks that have pushed April CPI to 3.8% and gasoline to $4.54/gallon, removing near-term rate-cut hopes and raising the risk of hikes under a divided FOMC. UBS estimates the balance-sheet reduction alone could subtract roughly nine percentage points from S&P 500 returns over two to three years, with AI growth stocks most exposed.