Trump Taps Kevin Warsh for Fed Chair, Banking on a Traditionalist for an Unconventional Economic Moment

WASHINGTON (AP) — In a move that could reshape U.S. monetary policy, President Donald Trump announced his intention to nominate Kevin Warsh, a former Federal Reserve governor, as the next chair of the central bank. The decision, aimed at replacing current Chair Jerome Powell in May, reflects Trump's push for a leader who he believes will deliver the "booming economy" central to his reelection platform.

Trump's description of Warsh as coming from "central casting" highlighted the nominee's conventional appearance and pedigree—a stark contrast to the unconventional pressures the President has placed on the Fed. Warsh, 55, embodies the traditional profile of a central bank chief, yet he is poised to take the helm at a moment when Trump has openly demanded interest rate cuts tailored to White House preferences.

Such aggressive rate reductions, while potentially stimulating short-term growth, risk overheating an economy already grappling with persistent inflation. With affordability a pressing concern for many Americans, the Fed's path forward balances political demands against its mandate to ensure price stability.

Warsh, a runner-up for the Fed chairmanship in 2017 when Powell was selected, brings a resume featuring degrees from Stanford and Harvard Law. He served as the youngest governor on the Fed's board from 2006 to 2011, following roles as an economic aide in the George W. Bush administration and an investment banker at Morgan Stanley. His marriage to Jane Lauder, daughter of Republican donor and cosmetics heir Ronald Lauder, further ties him to influential GOP circles.

During the 2008-09 financial crisis, Warsh worked closely with then-Chair Ben Bernanke, who later praised his political acumen and Wall Street connections. However, Warsh's crisis-era skepticism toward deep rate cuts and large-scale bond purchases—he initially opposed the Fed's $600 billion Treasury buying program in 2011—revealed a cautious, at times contrarian, approach to monetary stimulus.

In recent years, Warsh has sharpened his criticism of the Fed. As a visiting fellow at Stanford's Hoover Institution and a lecturer at its business school, he has called for a "regime change," accusing Powell of overstepping the Fed's mandate by engaging on climate and diversity issues. In media appearances and op-eds, Warsh has argued that the Fed's inflation model is flawed, contending that government spending and money printing, not wage growth, drive price surges.

Notably, Warsh has positioned artificial intelligence as a disinflationary force that could boost productivity without fueling inflation—a view aligning with Trump's optimism about AI-driven growth. "AI will be a significant disinflationary force, increasing productivity and bolstering American competitiveness," Warsh wrote in a Wall Street Journal essay last November.

The nomination sets the stage for a contentious confirmation process, as senators weigh Warsh's Wall Street background, his crisis-era record, and his alignment with Trump's economic agenda against the Fed's need for operational independence.

Voices from the Street

"Warsh is a serious, credentialed choice who understands the institution from the inside," says Eleanor Vance, a former Treasury official and current senior fellow at the Brookings Institution. "His experience during the crisis is invaluable, though his recent rhetoric about 'regime change' worries those who prize Fed stability."

"This is a political puppet appointment, plain and simple," fires back Marcus Thorne, a lead economist at the progressive Economic Policy Institute. "Warsh spent years downplaying crisis risks, opposed necessary stimulus, and now parrots Trump's fantasy that inflation is solved. Putting him in charge to cut rates for electoral gain is a dangerous gambit with working-class families' livelihoods."

"The market sees a competent operator who may bring predictability," notes David Chen, a managing partner at a D.C.-based investment advisory firm. "His AI productivity thesis is gaining traction, but the immediate test will be navigating political pressure while maintaining credibility."