WASHINGTON (AP) – President Donald Trump’s nominations were made Friday. Kevin Warsh As Fed chair, he could bring fundamental changes to a central bank that dominates the global economy and markets like no other.
If confirmed by the Senate, Warsh would be subject to intense scrutiny from financial markets and Congress, as he is a presidential appointee. demanded loudly Interest rates are much lower than many economists believe are justified by economic conditions. whether he can keep the feds long years of independence It will both appease Trump and distance him from everyday politics. tremendous challenge.
Still, Mr. Warsh’s former colleagues and friends say he has the intellectual weight and interpersonal skills to potentially pull it off. His family also has ties to Trump, which could ease pressure from the White House.
Raghuram Rajan, an economics professor at the University of Chicago and former head of India’s central bank, said Mr. Warsh is “of a thoughtful disposition and will be expected to have not only the intellectual understanding but also the diplomatic talent to navigate the difficult position we are in at the moment.”
Warsh will replace current Chairman Jerome Powell when his term expires in May. President Trump selected Powell as Fed Chair in 2017, but this year attacked him mercilessly That’s because they didn’t lower interest rates fast enough.
“I have known Kevin for a long time and believe he will go down as one of the great Fed Chairs, perhaps one of the best,” Trump wrote on social media. “Above all he is ‘core casting’ and will never let you down.”
Trump said late Friday in the Oval Office that he did not ask Warsh to commit to cutting rates, calling such questions “inappropriate” and adding, “I want to keep it nice and pure.”
But President Trump added, “But he certainly wants to lower rates.”
The appointment, which requires Senate confirmation, represents a homecoming trip for Warsh, 55, who served on the Fed’s board from 2006 to 2011. He was appointed at the age of 35, making him the youngest president in history. He is currently a fellow at the right-wing Hoover Institution and a lecturer at the Stanford Graduate School of Management.
AP Audio: President Trump nominates former Fed official Warsh to replace Powell as next Fed chair
AP Washington Correspondent Sagar Meghani reports on President Trump’s selection to head the Federal Reserve Board.
In some ways, Mr. Warsh is an unlikely candidate for a Republican president, as he has long supported raising interest rates to control inflation. By contrast, President Trump has said the Fed’s key interest rate should be as low as 1%, a level few economists support and far below current levels. Approximately 3.6%.
During his time as governor, Mr. Warsh opposed some of the low interest rate policies the Fed pursued during and after the Great Recession of 2008-2009. He also often expressed concern at the time that inflation would soon accelerate, even though it remained at rock-bottom levels for years after the recession ended.
However, recently speeches and opinion columnMr. Warsh has expressed support for lowering interest rates, and appears to align with Mr. Trump’s views.
initial reaction
Financial markets reacted in a way that suggests investors expect Mr. Warsh to be able to keep interest rates a little higher over the long term. The dollar and long-term US Treasury yields rose. US stocks fell about 0.5%. The biggest movers were volatile metal markets, with gold down more than 5% and silver down more than 13%.
In Congress, Sen. Thom Tillis, R-North Carolina, reiterated in social media posts that he would oppose Warsh’s nomination until a presidential election is decided. Department of Justice investigation Implications for Powell have been resolved.
Mr. Tillis is a member of the Senate committee considering Mr. Warsh’s nomination.
He added that Warsh is a “qualified candidate,” but stressed that “protecting the Federal Reserve’s independence from political interference and legal intimidation is non-negotiable.”
Tillis’ opposition could complicate the approval process. Asked late Thursday whether Warsh could be confirmed without Tillis’ support, Senate Majority Leader John Thune said “probably not.”
“This nomination is the latest step in President Trump’s attempt to seize control of the Fed,” said Sen. Elizabeth Warren of Massachusetts, the committee’s top Democrat.
Will changes come to the Fed?
Mr. Warsh has frequently criticized the Fed for its holdings of trillions of dollars in government and mortgage-backed securities accumulated after the Great Recession and during the pandemic.
Warsh blamed the large-scale bond purchases aimed at lowering long-term interest rates and stimulating the economy, which allowed Congress to increase spending without worrying about rising borrowing costs.
But reducing the Fed’s $6.6 trillion balance sheet will be a difficult task, as banks have become accustomed to having large amounts of cash in the Fed’s financial system.
Warsh also said the Fed’s economic model incorrectly assumes that rapid economic growth could push up inflation. Rather, “inflation is caused when governments spend too much and print too much,” he wrote in a November Wall Street Journal column.
control the fed
Announcement will be made later Unprecedented extended public investigation. The Fed chairman is tasked with fighting inflation in the United States while supporting maximum employment. The Federal Reserve is also the nation’s top banking regulator.
Over time, the Fed’s interest rate decisions affect borrowing costs throughout the economy, including mortgages, auto loans, and credit cards.
Mr. Trump is seeking to tighten control over the Federal Reserve. In August he Tried to fire Lisa Cookappointed as one of seven directors on the Fed’s Board of Governors to secure a majority on the Board. However, Mr. Cook filed a lawsuit to keep her joband the Supreme Court; last week’s public hearingseemed to want to keep her in place until the lawsuit was resolved.
Powell revealed this month The Fed was reportedly subpoenaed by the Justice Department regarding his testimony to Congress regarding the $2.5 billion renovation of the building. Chairman Powell said the subpoena was a “pretext” to force the Fed to cut interest rates.
President Trump’s economic policy
Warsh has expressed support for the president’s economic policies despite his background as a more traditional, pro-free trade Republican.
In a January 2025 column in the Wall Street Journal, Warsh praised President Trump’s deregulatory policies and potential spending cuts, saying they would help curb inflation. He also suggested that artificial intelligence could improve productivity and make the economy more efficient while reducing inflation. If inflation falls, the Fed will be able to lower interest rates.
In December, President Trump wrote on social media about the need to lower borrowing costs, saying, “Nobody who disagrees with me will ever be Fed Chairman!”
Potential challenges and backlash
If approved, Mr. Warsh would be faced with the challenge of significantly lowering interest rates. The chair is just one member of the Fed’s 19-member rate-setting committee, 12 of whom vote on each rate decision. The committee is Already split There is a divide between those who are concerned about persistent inflation and want to keep interest rates on hold, and those who believe that the recent rise in unemployment indicates economic stagnation and that interest rates need to be lowered to encourage employment.
Financial markets may also rebound. If the Fed lowers short-term interest rates too aggressively and is seen as doing so for political reasons, Wall Street investors could sell their Treasuries for fear of rising inflation. These sales would push up long-term interest rates, including mortgage rates, and would backfire on Mr. Warsh.
Mr. Trump considered appointing Mr. Warsh as Fed chairman during his first term, but ultimately chose Mr. Powell. Mr. Warsh’s father-in-law is Ronald Lauder, heir to the Estée Lauder cosmetics fortune, a longtime donor and confidant of Mr. Trump.
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