US President Donald Trump yesterday announced that he is nominating former US Federal Reserve governor Kevin Warsh to be the next central bank chief.
Trump’s decision capped a closely watched search for a successor to Fed Chair Jerome Powell, whom the president has repeatedly lambasted for not cutting interest rates more swiftly.
“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote on his Truth Social platform. “On top of everything else, he is ‘central casting,’ and he will never let you down.”
Photo: Getty Images North America, AFP
Powell’s term at the helm ends in May.
Trump’s selection ends a race that had narrowed to four contenders — Warsh, Fed Governor Christopher Waller, BlackRock senior managing director Rick Rieder and Trump’s top economic adviser Kevin Hassett.
Warsh would need to be confirmed by the US Senate, facing questions by lawmakers on both sides of the aisle.
If given the green light, he is also set to take the Fed chief role at a time when the Trump administration has sharply escalated pressure on the independent central bank.
Trump’s recent moves have sparked worries about the Fed’s insulation from politics, which if eroded could have ramifications for the world’s biggest economy, experts said.
Warsh has stepped up his criticism of the Fed, endorsing many of the policy positions of Trump and his administration.
He was a mergers and acquisitions banker at Morgan Stanley.
In Trump’s first term, the president considered Warsh for the Fed chair position as well, but eventually chose Powell.
As Trump continues to call for lower interest rates to boost the economy, all eyes would be on how Warsh defends the bank’s independence in the face of politics.
Already, Trump has sought to fire Fed Governor Lisa Cook over claims of mortgage fraud, sparking a legal battle likely to prove crucial in determining how much discretion the president has when it comes to removing key central bank officials.
The Trump administration has also launched an investigation into Powell over renovations at the Fed’s headquarters, in a probe that Powell has slammed as a threat to the bank’s independence.
The next Fed chairman would need to convince financial markets and policymakers that he is upholding the bank’s dual mandate of stable prices and low unemployment independently of politics, analysts said.
That job is becoming increasingly challenging as Trump’s tariffs over the past year have fueled worries of stubborn inflation, while the employment market has cooled.
The situation has left Fed policymakers walking a tightrope as they adjust interest rates, deciding if they should keep levels higher to curb inflation or lower them to boost the economy.
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