Trump’s choice of a former inflation hawk for Fed chair put rate‑cut hopes under the microscope
US president Donald Trump’s nomination of former Federal Reserve governor Kevin Warsh to replace Jerome Powell in May set off a fresh round of debate over the path of US interest rates and what it could mean for funding costs across Wall Street and Main Street.
The move followed months of public jockeying by contenders and came as the Fed’s stance on rates, balance‑sheet policy and inflation already sat at the center of mortgage‑market strategy.
Warsh, 55, served on the Fed’s Board of Governors from 2006 to 2011 and emerged as a key liaison to Wall Street during the global financial crisis. He later built a reputation as an inflation hawk critical of ultra‑easy policy before gradually aligning himself with Trump’s calls for lower rates.
He also worked in the M&A group at Morgan Stanley in New York, then moved to Washington as special assistant to the president for economic policy and executive secretary of the National Economic Council.
More recently, he served as the Shepard Family Distinguished Visiting Fellow in Economics at the Hoover Institution, lectured at Stanford Graduate School of Business and became a partner of Stanley Druckenmiller at Duquesne Family Office LLC.
Trump’s endorsement and a hawk‑turned‑dove
Trump announced the pick on social media, calling Warsh one of the “Great Fed Chairmen” in the making.
“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,” Trump wrote on Truth Social.
“On top of everything else, he is ‘central casting,’ and he will never let you down.”
Markets initially reacted with a stronger dollar and higher Treasury yields, moves that later faded as investors reassessed Warsh’s mixed record as a hawk who recently argued for lower rates.
Peter Cardillo, chief market economist of Spartan Capital Securities said it was “kind of difficult to assess how the market is going to accept this nomination,” noting Warsh “was considered a hawk, but recently he seems to have aligned himself with Trump.”
Several analysts emphasized the balance between Fed independence and White House pressure.
“At the end of the day, the Fed has to remain data dependent and it has to remain independent,” Fiona Cincotta, senior market analyst, City Index, London, said.
“And I don't think that will change under Kevin Warsh. Although we're talking about a change at the head of the Fed, this is a committee.”
Warsh’s monetary stance and crypto comments
During his time on the Board of Governors, Warsh was known for his concern about inflation and support for higher rates, a record that many investors still associated with a more cautious approach to easing.
More recently, however, he argued that policy rates could be “significantly lower,” a shift that brought him closer to the White House’s preference for cheaper money.
Warsh also stood out for his comments on digital assets. He described cryptocurrencies as a “sustainable store of value, like gold” and pushed back on critics who warned that Bitcoin could undermine the Fed’s ability to manage the economy.
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