President Donald Trump has announced Kevin Warsh as his nomination for the next Chair of the Federal Reserve, selecting a candidate who has been an outspoken critic of the US central bank.
In a post on his Truth Social platform, Trump expressed hope in Warsh’s abilities.
“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best. On top of everything else, he is ‘central casting’, and he will never let you down.”
Donald Trump
The move ends months of speculation about who the US President would pick to replace Jerome Powell , as he waged an extraordinary campaign to influence policymaking at the Fed by repeatedly calling for rate cuts.
Warsh, 55, a former Federal Reserve Governor who has deep ties to Wall Street, had previously interviewed for the job of Chair in 2017 when the role went to Powell, whose term ends in May.
Trump’s pick will have to be confirmed by the Senate. Being the Chair of the Fed is one of the most powerful roles in the US government, with enormous influence over the world’s largest economy.
The dollar strengthened early on Friday after it was reported that Warsh was expected to be Trump’s choice, but then eased back after the nomination. Gold fell by 4.8% to $5,132 an ounce.
Warsh has warned about inflation risks in the US in the past, but has also echoed Trump’s critique of the Fed for being too slow to cut interest rates.
Since resigning from the central bank in 2011 over its post-financial crisis stimulus package, Warsh has criticised it publicly on multiple occasions.
In April last year, he issued a stinging attack, saying the institution’s central bankers should not be treated as “pampered princes” and it too regularly “opines on matters outside its remit” which has led to “systemic errors” in its main role of trying to keep prices stable.
Warsh, a New Yorker who was Special Assistant for economic policy from 2002 to 2006, served as Fed Governor between 2006 and 2011, a period that included the response to the global financial crisis, and was its representative to the G20 group of countries.
He is now a lecturer at the Stanford Graduate School of Business and has roles at the courier UPS, the Korean e-commerce company Coupang and the Duquesne Family Office, the investment firm of the billionaire Stanley Druckenmiller.
Warsh has been a longtime critic of the ultra-loose monetary policy pursued by the Fed since the financial crisis, including the central bank’s expanded balance sheet.
He had previously been seen as a monetary policy hawk, but appears to have aligned himself with the White House’s push for lower borrowing costs. In December, Trump said of Warsh, “He thinks you have to lower interest rates.”
Markets Likely To Consider Walsh Safe Choice
Stephen Brown, a US Economist at Capital Economics, said that markets were likely to consider Warsh “a relatively safe choice” and will alleviate concerns that the president was going to pick “a full-blown Trump stooge” to be the next Fed chair.
Brown said that Warsh’s “long-running hawkish views should help to counteract concerns that he might morph into a full-blown Trump stooge.”
“That said, his firm conviction that both AI and the Trump administration’s regulatory push will help to hold down inflation, as well as his longstanding view that the Fed should operate with a much smaller balance sheet, present the risk of some upward pressure on long-term bond yields.”
Stephen Brown
Other candidates on the shortlist to be Federal Reserve Chair had been Kevin Hassett, the National Economic Council Director; Christopher Waller, a Fed Governor, and Rick Rieder, an Executive at BlackRock.
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