Trump Taps Former Fed Governor Kevin Warsh for Central Bank's Top Job
WASHINGTON — In a move that could reshape U.S. monetary policy, President Donald Trump announced Friday his intent to nominate Kevin Warsh, a former Federal Reserve governor and a vocal critic of the central bank's recent handling of inflation, as the next chair of the Federal Reserve Board.
The announcement, made via the president's Truth Social platform, comes as Trump has repeatedly and publicly pressured the Fed for more aggressive interest rate cuts to stimulate economic growth. If confirmed by the Senate, Warsh would succeed Jerome Powell, whose tenure has been marked by a fraught relationship with the White House.
Warsh, 54, served on the Fed's board from 2006 to 2011, appointed by President George W. Bush just before the global financial crisis. Since leaving the Fed, he has advised billionaire investor Stanley Druckenmiller and held fellowships at Stanford University's Hoover Institution. While he has suggested openness to lower rates, his recent writings have lambasted the Fed for a "credibility crisis" and called for a "regime change," even as he stresses the necessity of the institution's independence.
His nomination plunges the central bank deeper into a political maelstrom. Powell, initially appointed by Trump in 2018 and later renominated by President Joe Biden, has drawn the president's ire for what he deems an overly cautious approach to lowering borrowing costs. Trump has publicly derided Powell with insults like "dumb guy" and "Mr. Too Late." The discord intensified earlier this month when Powell revealed the Fed had received Justice Department subpoenas—which he characterized as intimidation over rate decisions—related to a headquarters renovation project. The White House denied directing the probe.
"This isn't just about changing the pilot; it's about changing the flight plan for the entire economy," said Michael Arrington, a financial historian at Georgetown University. "Warsh's critique of the Fed's inflation fight suggests he might favor a different policy mix, but his confirmation battle will be a referendum on the Fed's very independence."
The path to confirmation is fraught. Several Senate Republicans have expressed outrage over the subpoenas targeting Powell. Senator Thom Tillis (R-N.C.) has vowed to block all Fed nominees until the matter is resolved. Furthermore, some analysts speculate the controversy might encourage Powell to remain on the Fed's board as a regular governor after his chair term ends in May, potentially diluting the influence of a new chair.
Economist Kenneth Rogoff has described Warsh as "highly regarded" but "even more hawkish than Powell," indicating a preference for tighter monetary policy to control inflation—a stance seemingly at odds with Trump's public demands for deep cuts.
The Federal Reserve operates under a dual mandate to maximize employment and stabilize prices. After hiking rates aggressively to combat a four-decade inflation high in 2022-2023, the central bank has begun a slow easing cycle. Inflation has moderated but remains above the Fed's 2% target, prompting officials to advocate for a measured approach, a strategy Trump has openly contested.
"I'm looking for somebody that will be honest with interest rates," Trump said on Dec. 10. "Our rates should be much lower." He has asserted that his business acumen should grant him a voice in rate-setting, though he claims not to have demanded pledges from candidates.
The nomination also highlights Trump's broader challenges in exerting control over the Fed. His attempt to remove board member Lisa Cook over fraud allegations has been stalled by the courts, underscoring the legal protections for Fed officials.
Voices from the Street:
"Finally, someone who might actually listen to Main Street instead of ivory-tower economists," said Sarah Jenkins, a small business owner from Ohio. "We've been crushed by high borrowing costs. Trump gets that a strong economy needs cheaper money, and Warsh seems pragmatic enough to deliver."
"This is a terrifying assault on the last bastion of non-political economic stewardship," fired back David Chen, a former Treasury official and current policy analyst. "Warsh's own writings contradict Trump's demands. This is about installing a loyalist, period. The subpoenas against Powell were a warning shot, and the market should be deeply worried about what comes next."
"The real test will be in the Senate hearings," noted Priya Sharma, a political science professor at Vanderbilt. "Will Warsh unequivocally defend the Fed's operational independence, or will he appease his benefactor? His answers will determine not just his fate, but the market's confidence for the next four years."
"It's a smart pick in a way," mused Ben Carter, a retired investment banker in Florida. "Warsh has the pedigree to reassure Wall Street but has also signaled discontent with the status quo. Whether he can navigate between Trump's whims and the Fed's institutional integrity is the multi-trillion-dollar question."
The Federal Open Market Committee (FOMC), a 12-member panel, technically sets rates, though the chair holds considerable sway. Warsh's potential leadership arrives at a delicate moment, as the Fed balances persistent inflation against a cooling labor market and global economic uncertainty.