Betting sites point to the Senate opposition giving way. The probability that Kevin Warsh will be approved as the new Fed chief in May - when Powell's term expires - is 86 percent, according to Polymarkets.
"Kevin Warsh is the clear favorite, but approval is not guaranteed," writes Mattias Scheiber, portfolio manager at asset manager Allspring Global Investments, in an email to TT.
Expecting compromise
The Senate hearing on Tuesday, which lasted more than two hours, was tough, partly because Donald Trump said that the key interest rate would be cut as soon as Warsh takes over as Fed chief. Warsh firmly denied making any promises to Trump in order to be nominated and promised to defend the central bank's independence.
Scheiber is counting on a compromise, where Warsh will only be given the green light when the Trump administration backs down from its threats to prosecute Jerome Powell, the current head of the US Federal Reserve (Fed).
An end to the legal process against Powell is also a condition put forward by Republican Senator Thom Tillis, who could sit on a tie-breaking vote which might stop the approval of nominee Warsh.
It's quite uncertain right now. How the hearing went yesterday doesn't really change matters for Tillis, says Elisabet Kopelman, US expert at SEB.
No vote announced
Eiko Sievert, an analyst at the credit rating agency Scope Ratings, is also unsure whether Warsh will pass through the eye of the needle - although a delayed approval is the main scenario.
“The ongoing Department of Justice investigation into current Chairman Jerome Powell remains the primary reason for a potential delay, although we expect Warsh’s nomination will ultimately be confirmed,” he writes.
A vote in the committee, which must give the green light before Warsh's nomination is brought up for a vote in the full Senate, has not yet been announced.
