The decision, which was made by a vote of 13-11 along party lines on the committee, will be voted on by the entire Senate. But even there, 56-year-old Warsh is expected to receive support from the Republican majority.
Warsh is President Donald Trump's nominee to be the new head of the Fed.
The decision about his leadership comes after the Trump administration concluded a criminal investigation into sitting Fed Chairman Jerome Powell, which led Republican Senator Thom Tillis to signal on Sunday that he would stop blocking a go-ahead for Warsh as the new Fed chairman.
Previously, Tillis – who has a casting vote on the Banking Committee – said he would not let Warsh through as he believed the Trump administration's investigation into Powell threatened the Fed's independence.
The investigation began when Trump repeatedly attacked Powell and the Fed for not lowering the policy rate as quickly as the president wanted. Powell has insisted that decisions about monetary policy should be made without political interference.
Concerns have been raised that Warsh would be less independent. In a speech to the Banking Committee in April, Warsh said he did not believe that "the independence of monetary policy is threatened when elected officials express their views on interest rates," but he also added:
I am determined to ensure that monetary policy remains fully independent.
Powell's term expires on May 15, but he can remain a member of the central bank until January 2028.
