Trump picks former Fed official Kevin Warsh to run US central bank

WASHINGTON – US President Donald Trump on Jan 30 chose former Federal Reserve governor Kevin Warsh to head the US central bank when Mr Jerome Powell’s leadership term ends in May.

His announcement on Jan 30 gives a frequent Fed critic a chance to put his idea of monetary policy “regime change” into practice at a moment when the President has pushed for more control over the central bank.

“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,” Mr Trump said in announcing his latest move to put his stamp on a Fed he persistently lambasts for not caving in to his demands for lower interest rates.

Global stocks edged higher, while the US dollar rose and the price of gold plunged, after Mr Trump announced his pick of Mr Warsh, who markets perceive as someone who would support lower rates but who would stop well short of the more aggressive easing associated with some of the other potential nominees.

Mr Trump announced the nomination, which requires confirmation by the US Senate, in a post on social media. No public events have been listed on the President’s schedule for Jan 30 involving the Fed.

The Fed has long been seen as a stabilising force in global financial markets, due in no small part to its perceived independence from politics. Mr Trump’s escalating efforts to test that independence, including his Justice Department’s decision to

open a criminal probe into Mr Powell

in January, have set the stage for a challenging Senate confirmation process for any successor.

Republican US Senator Thom Tillis has said he will not support any of Mr Trump’s Fed nominees amid the ongoing probe, while fellow Republican Senator Lisa Murkowski has called for an investigation into the department’s actions.

There is also the possibility that Mr Powell, who called the criminal probe a pretext to pressure the Fed into setting monetary policy as the President wishes, may opt to stay on at the Fed even after his chair term is up, in a bid to safeguard the Fed from political capture.

The nomination caps a months-long process that often resembled a public audition as Mr Warsh, White House economic adviser Kevin Hassett and other top contenders – including sitting Fed governor Christopher Waller and Wall Street insider Rick Rieder – appeared regularly on television to tout their credentials and showcase their thoughts about the economy and Fed policy.

In August 2025, Mr Trump

named White House adviser Stephen Miran to the Fed,

where he has become a leading proponent of the aggressive rate cuts that the President has long sought.

Mr Trump has also

tried to force out Fed governor Lisa Cook

in a battle now before the Supreme Court that, if successful, would mark the first time a president has ever fired a Fed policymaker.

“This nomination is the latest step in Trump’s attempt to seize control of the Fed,” Senator Elizabeth Warren, the top Democrat on the US Senate Banking Committee, said in a statement citing the probes into Mr Powell and Ms Cook.

“No Republican purporting to care about Fed independence should agree to move forward with this nomination until Trump drops his witch-hunt.”

Other Republican senators on the panel, however, said Mr Warsh would be good for Fed independence.

“No one is better suited to steer the Fed and refocus our central bank on its core statutory mandate,” Senator Bill Hagerty said in a social media post.

Warsh favours broad overhaul of central bank

While Mr Warsh is no White House insider, he has been a confidant of the President and a guest at his Florida estate. He also looks poised to push many of Mr Trump’s priorities as a “shadow” Fed chair until Mr Powell’s term ends in mid-May.

A lawyer and a distinguished visiting fellow in economics at Stanford University’s Hoover Institution, Mr Warsh has said he believes that the President is right to press the central bank for steep reductions in interest rates.

He has also criticised the Fed for underestimating the inflation-busting potential of productivity growth supercharged by artificial intelligence. He has called for a broad overhaul of the central bank that would slim its balance sheet and ease bank regulations.

Mr Warsh, 55, was nearly named to the job in Mr Trump’s first term before being passed over for Mr Powell, and has since kept a steady public profile through speeches and essays that have taken Mr Powell and his colleagues to task for their management of the Fed’s balance sheet, interest rates and other actions.

He now will be responsible for an institution that he has said should scale back its footprint in the economy and change the way it manages monetary policy.

It is not clear how the pick may affect the trajectory of rates in the short term. The Fed’s three rate cuts in 2025 brought short-term borrowing costs to the 3.5 per cent to 3.75 per cent range.

In January, citing stronger growth and a stabilising labour market, it left rates on hold and signalled a pause ahead.

Markets for now do not expect another rate cut until the next chairman is in place in June.

With a background on Wall Street, including as a partner in the office managing the wealth of investing giant Stanley Druckenmiller, and family ties to major Trump supporter Ron Lauder, Mr Warsh will be under an intense spotlight to prove his independence from the President.

As a Fed governor from 2006 to 2011, Mr Warsh’s familiarity with Wall Street executives and investors made him a chief liaison to the financial community for then Fed chairman Ben Bernanke during the 2007-2009 financial crisis.

Though he did not dissent against the massive bond purchases Mr Bernanke used to nurse the economy out of what proved to be a long downturn, he was concerned they would stoke inflation and eventually resigned.

Mr Warsh’s inflation concerns proved misplaced, but the large size of the Fed’s balance sheet and the role it plays in managing interest rates have remained a concern.

He now argues that shrinking the Fed’s big balance sheet would allow it to “redeploy” excess liquidity in financial markets to the real economy by lowering the Fed’s policy rate.

In follow-up posts, Mr Trump said he did not choose Mr Hassett for the top Fed job because he wanted to keep him at the White House, where the adviser is doing “an outstanding job”.

The others who were interviewed for the job also would have been good choices and “have a great and unlimited future with ‘TRUMP’. Such amazing talent in our country”, the President added. REUTERS