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. The move ends months of speculation about who the president would pick to replace Jerome Powell, as he waged an extraordinary campaign to influence policymaking at the Fed by repeatedly calling for interest rate cuts. Powell’s second term as chair is due to end in May.
Writing on his Truth Social platform, Trump said: “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.” Warsh, 55, a former Federal Reserve governor with deep ties to Wall Street, had previously interviewed for the job of chair in 2017 when the role went to Powell. Trump’s pick will have to be confirmed by the Senate.
Stephen Brown, a US economist at Capital Economics, said markets were likely to consider Warsh “a relatively safe choice” and his nomination would alleviate concerns that the president was going to pick “a full-blown Trump stooge” to be the next Fed chair. Mark Carney, the Canadian prime minister and former governor of the Bank of England, said in a social media post that Warsh was “a fantastic choice to lead the world’s most important central bank at this crucial time”.
The dollar strengthened early on Friday after it was reported that Warsh was expected to be Trump’s choice, and was up 0.5% against a basket of currencies after the nomination. Gold fell by 9.1% to $4,903.60 an ounce. Silver dropped 26.7% to $85.12 an ounce. Wall Street traded slightly lower, with the benchmark S&P 500 down 0.5% in New York.
Warsh will still need at least 51 votes in the US Senate to be confirmed. Though Republicans have a 53-47 majority in the chamber, multiple Republican senators spoke in defence of Powell after it emerged that the Fed chair is under federal criminal investigation. One senator, Thom Tillis of North Carolina, said he would block any of Trump’s Fed nominees until the investigation is called off. On Friday, Tillis said that Warsh was “a qualified nominee with a deep understanding of monetary policy” but said that he would still vote against him until Powell’s investigation is resolved. Elizabeth Warren, a Democrat and ranking member of the Senate’s banking committee, said in a statement: “No Republican purporting to care about Fed independence should agree to move forward with this nomination.”
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. High interest rates can alleviate inflation at the risk of upping unemployment. Rates are currently at a range of 3.5% to 3.75%, which most economists at the Fed currently see as neutral to prices and unemployment. 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.
