Trump Poised to Tap Kevin Warsh for Fed Chair, Signaling Hawkish Shift
Markets are bracing for a potential hawkish turn at the world's most powerful central bank, as President Donald Trump prepares to nominate former Federal Reserve Governor Kevin Warsh to succeed Chair Jerome Powell, according to multiple reports. The long-awaited decision, expected imminently, aims to resolve a leadership question that has loomed over investors for months.
Bloomberg News reported that Warsh will get the nod, a development followed by a rise in the U.S. dollar as traders assessed the implications. Warsh, who served as a Fed governor from 2006 to 2011, has been a vocal critic of the central bank's post-crisis policies, advocating for a significantly smaller balance sheet—a stance that places him at odds with President Trump's frequent calls for deeper interest rate cuts.
"If confirmed, Warsh would represent one of the more hawkish choices from the candidate pool," said Sonu Varghese, a global macro strategist at Carson Group. "We could see a Fed that, at the margin, is less accommodative, prioritizing balance sheet normalization even amid political pressure for looser policy."
The other main contenders were seen as Fed Governor Christopher Waller and BlackRock's Rick Rieder. White House economic adviser Kevin Hassett, an early frontrunner, faded from contention after Trump indicated a preference to keep him in his current role.
The nomination will immediately face intense scrutiny over the nominee's perceived independence. Economists argue that a Fed chair's ability to resist political pressure is the bedrock of credible inflation control and U.S. financial stability. Trump has repeatedly criticized Powell, dubbing him "Too Late" for not moving more aggressively to cut rates.
"The market reaction reveals the core dilemma," noted Damien Boey, a portfolio strategist in Sydney. "Warsh has expressed a preference for lower rates, but his trade-off is a radically smaller Fed balance sheet. Investors are now forced to game out a world with a less interventionist central bank."
The decision carries profound weight. The Fed's interest rate decisions ripple through the entire economy, influencing everything from interbank lending rates and Treasury yields to mortgage costs and corporate borrowing.
Market Voices: Reaction & Analysis
Eleanor Vance, Chief Investment Officer at Sterling Trust: "This is a sober, experienced choice. Warsh understands the institutional gravity of the role. While his balance sheet views are hawkish, his practical experience during the financial crisis may lead to a more measured approach than the headlines suggest."
Marcus Thorne, Economist at the Fiscal Policy Institute: "It's a baffling contradiction. The President wants massive stimulus but is picking a man known for wanting to tighten financial conditions by shrinking the Fed's footprint. This either signals an unacknowledged shift in White House economic thinking or a profound misunderstanding of the nominee's views."
Rebecca Choi, Retail Investor & Blogger at 'Main Street Macro': "I'm furious. This feels like a pick for Wall Street, not Main Street. A 'smaller balance sheet' sounds technical, but it translates to less support for the economy when the next downturn hits. After years of Trump bashing Powell for not cutting enough, he appoints someone who could pull support away faster? It makes no sense to regular people trying to plan their finances."
David Park, Former Treasury Official: "The immediate clarity is welcome, but the long-term test is independence. The real story won't be the first press conference, but the first time Warsh says 'no' to the White House. That's when we'll know what this Fed will truly be."