US President Donald Trump has nominated former Federal Reserve Governor Kevin Warsh to head the central bank when current Federal Reserve Chairman Jerome Powell’s term ends in May.
Friday’s announcement brings to an end a months-long, highly publicized search for a new chairman of the Federal Reserve, widely regarded as one of the world’s most influential economic officials.
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The move comes amid a public pressure campaign against Powell, who was appointed by President Trump during his first term but has repeatedly criticized the president for not cutting rates at the pace he wanted.
“I’ve known Kevin for a long time and I have no doubt that he will go down as one of the great Fed Chairs, perhaps one of the best,” Trump wrote on his Truth Social website. “Above all he is ‘core casting’ and will never let you down.”
The statement referred to the apparent compromise represented by Warsh. The 55-year-old is known to be a supporter of Trump and has recently called for lower interest rates, but is expected to fall short of the more aggressive monetary easing associated with other leading candidates.
Still, he is expected to face a punitive Senate confirmation hearing, and U.S. lawmakers are likely to be particularly critical given Trump’s public comments and the Justice Department’s decision earlier this month to launch a criminal investigation into Powell.
Critics, including Mr. Powell, said Trump’s actions were aimed at undermining the Fed’s independence and putting pressure on it to set monetary policy in line with the president’s wishes.
What does the Federal Reserve do?
The Federal Reserve has long been considered a stabilizing force in global financial markets because of its perceived independence from politics.
It is also tasked with fighting inflation in the United States while helping maximize employment. It is also the top banking regulator in the United States.
The agency’s interest rate decisions have a long-term impact on the cost of borrowing across the economy, including mortgages, auto loans and credit cards.
“This nomination is the latest step in President Trump’s effort to seize control of the Federal Reserve,” Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, said in a statement.
He pointed to the investigation into Mr. Powell and Mr. Trump’s efforts to oust Fed Director Lisa Cook, which is currently before the U.S. Supreme Court.
“Republicans who claim to care about the independence of the Fed should not agree to move forward with this nomination unless President Trump ends his witch hunt,” Warren said.
Meanwhile, Republican Sen. Thom Tillis said he would not vote to confirm any nominee until the Justice Department’s investigation into Powell is concluded.
“Protecting the Federal Reserve’s independence from political interference and legal threats is non-negotiable,” he said in a statement.
Still, some Republicans welcomed the nomination.
“There is no one better suited to lead the Fed and refocus the central bank on its core statutory mission,” Republican Sen. Bill Hagerty said in a statement.
If Warsh is confirmed, it remains unclear whether Powell will step down immediately or end his term. Traditionally, Fed chairmen step down as soon as a successor is appointed, but given the political climate, there is widespread speculation that Powell will stay on as long as possible.
Who is Warsh?
Warsh is currently a fellow at the right-wing Hoover Institution and a lecturer at the Stanford Graduate School of Management.
He served as a member of the Board of Governors of the Federal Reserve Board from 2006 to 2011, and was appointed at the age of 35, making him the youngest Federal Reserve Governor in history.
He was an economic aide in the Republican administration of George W. Bush and an investment banker at Morgan Stanley. His father-in-law is Ronald Lauder, heir to the Estée Lauder cosmetics fortune and a longtime donor and Trump confidant.
Mr. Warsh has previously supported raising interest rates to curb inflation, but recently he has advocated lowering them.
He has been a vocal critic of the current Federal Reserve leadership, calling for “systemic change,” and Warsh has criticized Powell for tackling issues such as climate change, which he says are outside the scope of his role.
Al Jazeera’s Kimberly Halkett, reporting from Washington, D.C., said Warsh’s experience means his appointment is likely to be well received by the market.
“In the short term, the consensus is that this is certainly a candidate who will do what the president wants,” she said.
“But ironically, what he can do long-term as board chairman is very similar to what the current board chairman, Jerome Powell, is doing now,” she said.
“It’s about having independence and making decisions based on economic data, not necessarily the political whims of the president.”
