Trump Adopts New Strategy for Fed Hot Seat
President Donald Trump announced his plans to nominate Kevin Warsh as the next Federal Reserve Chairman in a post on Truth Social. Trump praised Warsh profusely, saying he would be remembered as one of the “greatest—maybe the best—Fed Chairs. Warsh replaces Jerome Powell when Powell’s term ends in May.
Warsh is not new to the Fed. He served on the Board of Governors from 2006 to 2011 and has previously provided economic policy advice to Trump. There was no announcement marking Warsh’s comeback, having been overlooked in 2017 when Trump chose Powell for the central bank’s top job.
Following the news, the US dollar maintained its strength, while US stock futures continued to move lower. The market perceived Warsh as being more hawkish than some of the other candidates, although he has recently appeared to align with Trump by pushing for lower interest rates—a departure from his former reputation for being wary of inflation. At this point, the market is holding two narratives at once: Warsh echoes Trump's push to lower borrowing costs and overhaul the central bank, but traders believe he could still be a more assertive figure on inflation than other options. Michael Feroli (JPMorgan) highlights a key question: Warsh will be "soft" at first, but will that stance persist over the next year or two?
Professionally, Warsh currently serves as an advisor at Stanley Druckenmiller's Duquesne Family Office, a research fellow at the Hoover Institution, and a lecturer at Stanford Business School. In a months-long selection process, he beat out other finalists such as Christopher Waller, Kevin Hassett, and BlackRock executive Rick Rieder. Internationally, Mark Carney called Warsh a "fantastic" choice, and a number of Wall Street leaders also praised him—though some economists found Warsh's shift toward easing suspicious.
However, this nomination does not automatically change the direction of interest rates, as policy is determined by a vote of the FOMC (12 members). Another major challenge is the Senate confirmation process, which could be complicated by the Justice Department's investigation into the Fed and the ongoing renovations. Senator Thom Tillis called Warsh's nomination a capable one, but he withheld support until Powell's nomination was completed "fully and transparently," while Senate Banking Committee Chairman Tim Scott stated that the confirmation process would be conducted in an orderly manner. (alg)
Source: Newsmaker.id
