Trump Poised to Name Kevin Warsh as Next Fed Chair, Setting Stage for Monetary Policy Shift
WASHINGTON — President Donald Trump is preparing to nominate Kevin Warsh, a former Federal Reserve governor and longtime critic of its post-crisis policies, to lead the central bank, according to a Bloomberg report citing sources familiar with the deliberations. A formal announcement is expected Friday morning.
If confirmed, Warsh would bring a unique and potentially disruptive policy mix to the helm of the world's most influential central bank. He has recently advocated for sharp interest rate cuts—aligning with Trump's public demands—while maintaining a steadfast opposition to the quantitative easing (QE) programs that have flooded the financial system with liquidity since 2008.
Markets reacted immediately to the news Thursday. Equity indices turned lower, Treasury yields climbed, the dollar strengthened, and gold prices slipped—a pattern reflecting investor recalibration for a potential Warsh-led Fed.
Trump hinted at the impending decision during remarks Thursday evening, stating his choice would be "someone known to everyone in the financial world" and "won't be too surprising."
The momentum behind Warsh became undeniable throughout Thursday. Prediction markets on platforms like Polymarket and Kalshi showed his probability soaring to nearly 90%, overtaking other contenders like BlackRock's Rick Rieder. The shift followed reports of Warsh's visit to the White House, which analysts cited as the decisive signal.
Warsh, who served on the Fed's Board of Governors from 2006 to 2011, has called for a structural overhaul of the institution. His recent public alignment with Trump's desire for lower rates marks a shift from his earlier reputation as an inflation hawk. However, his core critique of the Fed's expanded balance sheet, which he argues has artificially subsidized Wall Street, remains unchanged.
"This is the 'hawkish dove' scenario materializing," said macro analyst Alex Krüger in a social media post, summarizing Warsh's stance. "He sees AI-driven disinflation justifying deep cuts, but wants to simultaneously drain the liquidity swamp created by QE."
This policy cocktail presents a novel challenge. Deutsche Bank economist Matthew Luzzetti noted in a December research piece that such an approach—deep rate cuts with balance sheet reduction—might require regulatory adjustments to function smoothly.
The implications for risk assets, particularly cryptocurrencies, are profound. The decade-long bull run in digital assets has been closely correlated with expansions of the Fed's balance sheet. Warsh's anti-QE stance could remove a key pillar of support. His personal views on crypto are complex: he has invested in crypto-adjacent firms like Bitwise, but in a 2022 Wall Street Journal op-ed he dismissed private cryptocurrencies as software "masquerading as money" and advocated for a U.S. central bank digital currency—a position at odds with Trump's pro-Bitcoin rhetoric.
Confirmation is not assured. Republican Senator Thom Tillis, a member of the Banking Committee, has vowed to block any Fed nominee until the Justice Department concludes its probe into current Chair Jerome Powell regarding Fed headquarters renovations. Prediction markets currently price the odds of a successful confirmation at just 39%.
Trump nearly selected Warsh in 2018 before ultimately reappointing Powell—a decision he has since called a mistake. Powell's term as Chair ends May 15, though he retains a seat on the Board until 2028.
Market Voices: Reaction to the Warsh Rumors
"Finally, someone who understands that endless money printing is a disease, not a cure. Warsh gets that the Fed's balance sheet is a distortion machine. This could be the moment we start restoring sanity to monetary policy." — Eleanor Vance, retired pension fund manager and longtime Fed critic.
"The markets are pricing in chaos. A dove on rates but a hawk on liquidity? It's a contradictory mandate that could destabilize the very financial plumbing he aims to fix. The transition will be messy, and Main Street will feel the volatility." — Marcus Thorne, chief strategist at Clearwater Capital.
"This is a catastrophic choice wrapped in a veneer of intellectualism. Warsh was wrong during the crisis, advocating austerity when the economy needed support. His 'structural overhaul' is code for undermining Fed independence to please his political patron. It's a surrender of the Fed to Trump's whims." — Dr. Anya Petrova, economics professor at Georgetown University, in an emailed statement.
"The crypto market hasn't fully priced this in. The end of the 'Fed put' via balance sheet expansion is a fundamental regime change. Assets that thrived on cheap, abundant liquidity—from tech stocks to Bitcoin—face a severe test. Investors need to look beyond the headline rate cuts." — David Chen, founder of a digital asset hedge fund.