Donald Trump is set to nominate former Federal Reserve governor Kevin Warsh to succeed Jay Powell as chair of the Federal Reserve, sources familiar with the matter have disclosed. During a recent event at the Kennedy Center in Washington, Trump teased the announcement, stating he would reveal his Fed chair nominee the following morning. His comments indicated that many would recognize the nominee as a respected figure within the financial community.
Warsh, who interviewed for the Fed chair position in 2017, was ultimately passed over in favor of Powell, whose term is scheduled to end in May of this year. The White House has not commented on these developments, which come as Trump’s preferences for the Fed chair have fluctuated in recent weeks.
Market reactions to the anticipated nomination were immediate, with the dollar strengthening and gold prices declining. Portfolio manager Bill Campbell noted that Warsh is seen as a more traditional choice, and the market’s response reflects this perception. Specifically, gold prices plummeted by 4.2 percent to $5,170 per troy ounce, while the dollar increased by 0.3 percent against a basket of peers. Additionally, futures tracking the S&P 500 and Nasdaq saw declines of about 0.9 percent and 1.1 percent, respectively. In Europe, the Stoxx 600 rose modestly by 0.2 percent.
Warsh, the youngest individual ever to serve as a Fed governor, is well-connected within Wall Street and Washington political circles. Despite his long-standing relationship with Trump, some skepticism remains concerning his hawkish views during his tenure at the Fed, which could complicate his acceptance by the president. Warsh has been an advocate for reducing the Fed’s balance sheet and called for “regime change” at the central bank.
This nomination process follows significant deliberations within the White House and could mark a return to more conventional economic leadership after months of controversy. It comes at a juncture where Trump’s criticism of Powell has intensified, labeling him a “moron” for maintaining high interest rates. Trump has pointed out that the current rates, which remain in the range of 3.5 percent to 3.75 percent, are detrimental to America’s economic health.
On social media, Trump expressed that Powell had “absolutely no reason” to retain elevated rates, arguing for lower borrowing costs to stimulate the economy. He has previously stated that any candidate he endorses must prioritize rate cuts.
Concerns regarding the Fed’s independence have escalated amid Trump’s repeated criticisms. In light of a criminal investigation into Powell related to a budget overrun at the Fed’s headquarters, tensions have mounted in the Senate. Some Republican senators have threatened to oppose Trump’s nominee unless the probe is abandoned.
Investment experts have suggested that Warsh’s traditional profile might alleviate concerns regarding the independence of the Fed, potentially benefiting the US dollar while posing some risks to short-term interest rate expectations and US equity markets.
Meanwhile, the betting markets on prediction platform Polymarket have shown Warsh’s odds for nomination soaring to 95 percent, with rival Rick Rieder’s chances plummeting to just 3 percent. Other names in the running include Fed governor Christopher Waller and White House economist Kevin Hassett, although recent political dynamics may influence the final outcome.
