The interest rate on your next car loan, mortgage, or credit card balance is now partly Kevin Warsh's problem. On Friday, the 56-year-old financier will be sworn in as chair of the Federal Reserve at the White House, stepping into a job that has rarely been harder and picking up a set of problems partly created by the man handing him the gavel.

Warsh succeeds Jerome Powell, whose eight-year term formally expired last Friday. Powell was briefly sworn in as temporary chair to bridge the gap and plans to remain on the Fed's board until a White House criminal investigation into cost overruns at the Fed's Washington headquarters is fully resolved. The Senate confirmed Warsh on May 13 on an almost party-line vote, after that investigation was settled to the satisfaction of a Republican senator who had held things up.

The inflation problem he's walking into

Warsh does not inherit a stable economy. Inflation is running well above the Fed's 2% target and, by most measures, accelerating. Two forces are driving it. First, the tariffs Trump imposed during his first year pushed up prices on a wide range of imported goods. Some Fed policymakers, including Powell, had been willing to treat that as a one-time price increase rather than persistent inflation, which would have left the door open to rate cuts later this year.

Then came the second shock. Trump's decision to go to war with Iran triggered a global energy price spike, and recent data show that spike is now spreading into services costs, the kind of inflation that is harder to shake. Chicago Fed President Austan Goolsbee said Monday that services inflation is "high and rising" and is "probably not coming from oil, it's probably not coming from tariffs." That distinction matters because it suggests something deeper is building.

Bond markets reacted sharply at the end of last week. Yields on U.S. government bonds, which move opposite to bond prices and feed directly into long-term borrowing costs like mortgage rates, shot higher as investors repositioned for what they now see as sticky inflation and likely rate increases. Interest-rate futures markets currently assign effectively zero probability to any change at Warsh's first rate-setting meeting in mid-June, with rates holding at 3.50% to 3.75%. Some investors now see Warsh having to raise rates as early as January.

What it means for ordinary borrowing

Rates staying high, or moving higher, means mortgages stay expensive. It means auto loans stay expensive. It means the credit card balance you are carrying costs more to service every month. The one bright spot is that savings accounts and money-market funds continue paying meaningful yields, but that is cold comfort for anyone trying to buy a house.

Warsh also inherits the Fed's $6.7 trillion balance sheet, a vast pile of Treasury bonds and mortgage-backed securities accumulated during the pandemic era to keep the economy afloat. He has signaled interest in shrinking it, which could push long-term interest rates even higher in the short run as the Fed steps back from being a large buyer of government debt. Progress is expected to be slow.

The deeper tension here is structural. Trump campaigned on lower prices and has publicly pushed for cheaper borrowing. Warsh may want to accommodate that politically, but a growing bloc inside the Fed is moving in the opposite direction. Goolsbee, who worked alongside Warsh during the 2008 financial crisis, said he is "excited" for the new chair but also made clear the institution needs guidance on what to do next. That is a polite way of saying the Fed is watching to see if Warsh will hold the line on inflation or bend toward the White House.

Unemployment sits at 4.3%, low by historical standards, which gives Warsh some room. But if inflation keeps climbing and the Fed raises rates in response, that cushion can disappear quickly. The economy Warsh inherits is not in crisis. It is, however, on a path that is getting narrower.