Trump Picks Inflation Hawk Warsh as Fed Chair
President Donald Trump announced on Friday that he is nominating Kevin Warsh to serve as the 17th chair of the Federal Reserve following the conclusion of Jerome Powell’s term in May. “I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM,” Trump wrote on Friday morning. “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.” During an Oval Office meeting later on Friday, Trump emphasized his selection, stating: “I would say that this was the perfect candidate.” This was the individual who stood out as the most qualified, the top student, educated at the best institutions, with everything seemingly perfect, and notably, the youngest person ever to serve on the Fed. Received the complete set. “Looks don’t mean anything, but he’s got the look, right?” Warsh is a somewhat conventional candidate for Fed chair: “a former Fed governor who was previously under consideration to be Treasury secretary in Trump’s second term and was a candidate for the top job at the Fed during Trump’s first term.” Warsh was appointed to the Fed in 2006 at the age of 35, making him the youngest person to have ever served on the Fed’s powerful board. Warsh, now 55, has recently altered his position on monetary policy. A former inflation hawk, Warsh now advocates for lower interest rates, as evidenced by various public statements he has made in recent months amid Trump’s reality-show-like spectacle surrounding his Fed chair decision. He has also advocated for a comprehensive reform of the central bank’s workforce.
“It’s reasonable to assume that he told the President he favors reducing interest rates today, otherwise he would not have been nominated,” wrote Samuel Tombs. “Our instincts suggest that Mr. Warsh will focus more on how history will assess his record rather than on catering to the President.” The choice of a new Fed chair stands as one of the most significant appointments a president can make – yet this nomination carries even more weight under the current administration. Trump has pledged to reduce the cost of living, while the Fed holds the responsibility for ensuring price stability. Trump has consistently criticized the Fed and Powell over the past year, chastising Powell, whom he selected as Fed chair, for failing to implement rate cuts. Earlier this month, Powell disclosed in a remarkable video statement that the Trump administration has initiated a criminal investigation into the Fed and its chair. In his remarkable condemnation, Powell stated that the action was a “pretext” to coerce the central bank into reducing rates to align with the president’s preferences. Trump’s dissatisfaction with Powell has been widely acknowledged, yet it remains uncertain whether he possesses the actual authority to dismiss him. In August, Trump brandished a termination letter during a meeting with a group of House Republicans at the Oval Office, as reported. Meanwhile, the Trump administration is presenting its case before the Supreme Court regarding the removal of Fed Governor Lisa Cook, whom the president stated he dismissed in August. The independence of the Fed is in jeopardy in this pivotal case, yet conservative Justices expressed skepticism regarding the administration’s legal arguments during oral discussions earlier this month.
Trump’s selection for the head of the central bank concludes a thorough search process that initially evaluated around a dozen candidates, ranging from MAGA stalwarts like National Economic Council Director Kevin Hassett to former Treasury Secretary Janet Yellen, as noted by Scott Bessent, Trump’s Treasury chief who oversaw the search. Bessent himself was also under consideration for the role but informed Trump that he would prefer to stay in his current position. Alongside Warsh, the remaining four candidates included National Economic Council Director Kevin Hassett, Fed Governor Christopher Waller, and BlackRock’s Rick Rieder. “Christopher Waller, Rick Rieder, and others were interviewed for the Fed position.” They all would have been exceptional and possess a promising and boundless future with “TRUMP.” There is remarkable talent in our country. Thank you! On Friday, Trump posted on Truth Social. Trump remarked in a separate post that Hassett would have been “a great Chairman. But, quite honestly, he is doing such an outstanding job working with me and my team at the White House, that I just didn’t want to let him go. Kevin is indescribably good so, as the expression goes, ‘if you can’t do better, don’t try to fix it!’” The Senate Banking Committee is set to evaluate Warsh’s nomination during a public hearing, after which the full Senate will cast their votes on his confirmation. However, this process may be compromised by the Trump administration’s unprecedented criminal investigation of Powell, a boundary that several prominent Republican senators indicated Trump has crossed, potentially delaying Warsh’s nomination until the investigation concludes.
“No Republican purporting to care about Fed independence should agree to move forward with this nomination until Trump drops his witch hunts of the current Chairman of the Federal Reserve and Governor Lisa Cook,” Sen. Elizabeth Warren said in a statement Friday. Trump’s attempts to politicize the Fed’s decisions have posed a risk to the central bank’s valued independence. Members of the Senate Banking Committee are likely to inquire of Warsh regarding his evolving stance on interest rates and any commitments he may have made to Trump concerning policy formulation. He may also face inquiries regarding his father-in-law, Republican mega-donor Ronald Lauder. In 2002, Warsh entered into marriage with cosmetics billionaire heiress and businesswoman Jane Lauder, who is the granddaughter of Estée Lauder. They convened at Stanford. Warsh served as an economist at the White House during the administration of George W. Bush. He is presently a visiting fellow at the Hoover Institution, a conservative-leaning think tank located at Stanford University. While Trump is advocating for significant interest rate reductions to accelerate US growth, certain economists and analysts point out that Warsh has previously demonstrated a tendency to oppose policies aimed at stimulating the economy. In April 2009, amid the Great Recession and a rising unemployment rate, Warsh voiced his concerns regarding inflation. “I continue to be more worried about upside risks to inflation than downside risks,” Warsh stated during a Fed meeting, as noted in the minutes that were subsequently released. His own reason for resigning from the Fed in 2011 highlights his aversion to loose monetary policy — at least prior to his candidacy for Fed chair this time around. “Kevin Warsh has been a monetary policy hawk his entire career and, most importantly, during a time when the labor markets fell out of bed. His dovishness today stems from convenience,” analysts posted on X Friday. “The President risks being misled.”
Warsh is regarded in economic and financial circles as a seasoned and credible policy figure with an extensive background. As a young Fed governor, he was instrumental in managing the financial crisis in collaboration with then-Fed Chair Ben Bernanke and former New York Fed President Timothy Geithner, who subsequently served as Treasury secretary. Nevertheless, he has demonstrated his ability to act independently in the past: He distanced himself from the central bank due to policy disagreements regarding the crisis-management tools employed by the Fed following the Great Financial Crisis. He expressed criticism of quantitative easing, specifically the large purchases of Treasury bonds aimed at lowering long-term interest rates, stating subsequently that such actions posed a risk of increasing inflation and extended the Fed beyond its fundamental mandate. “He got the policy response wrong in the aftermath of the Great Financial Crisis,” Joe Brusuelas stated during an interview. “He truly did not understand the nature, magnitude and implications of the Depression-like shock that occurred. During the defining crisis of our time – the Great Financial Crisis – Kevin Warsh continued to extoll inflation as the primary risk during 2007-08 as a massively deflationary event was unleashed via the near collapse of the American banking sector and freezing up of credit markets that ensued.”
