President Trump announces Fed Chair nominee

After months of speculation, President Trump finally announced his Fed Chair nominee, Kevin Warsh. Along with Council of Economic Advisors chair Kevin Hassett, Warsh had been at the top of the list for months. Other candidates discussed but not selected included Fed Governor Christopher Waller and Wall Street bond investor Rick Rieder.

Warsh now faces Senate confirmation. If he makes it through that process, he will take the seat on the Fed currently occupied by Stephen Miran and become chair when Jay Powell’s term ends in May.

Warsh’s Views

Historically, Warsh has been thought of as a monetary hawk, both in terms of interest rate policy and in the use of the Fed’s balance sheet. More recently, though, he has pushed for rate cuts. How much of that pivot has been due to a change in facts, analysis, or perspective, and how much has been due to campaigning for the Fed chair role remains to be seen. As recently as 2024, he was critical of Fed rate cuts. In 2025, though, he advocated for rate cuts based on the view that tariffs would not cause durable inflation—which most members of the FOMC would broadly agree with, and with the extent of cuts being the only real point of contention. Going forward, he is credible enough to stand a decent chance of convincing the Fed to move somewhat more quickly on rates from here, though we’ll need to see what the economic data look like once he’s in the chair seat.

Overall, Warsh is a credible nominee. His qualifications include a past stint as a Fed governor from 2006 to 2011, and persistent advocacy for the independent conduct of monetary policy. He is also not as closely associated with the administration as Hassett would have been. During the Global Financial Crisis, Warsh was seen as a liaison between the Fed and Wall Street during the Global Financial Crisis. However, his monetary policy record is less outstanding—even as the economy struggled in the aftermath of the crisis, he was overly concerned with inflation risks. Following that period, he worked at the Hoover Institution, a think tank known more for traditional conservative viewpoints rather than populist/Trumpian views, and the family office of legendary global macro investor Stan Druckenmiller.

Warsh is also focused on reform of the policy, staffing, and research functions of the Fed. In addition, he’s focused on further deregulation (which is somewhat ironic given he was on the Fed when a global crisis erupted following a period of financial deregulation). His historical view of central bank independence is reassuring.

It’s somewhat difficult to parse what Warsh would actually do in the seat, when his decision-making would be open to public scrutiny from the administration. Our initial take is that a heightened risk premium doesn’t need to be put into asset prices. His nomination increases the chances of more rate cuts this year but reduces the probability of irresponsible cuts.

Fed Balance Sheet

One notable view from Warsh is that the Fed should collaborate on some issues with Treasury and that the Fed’s balance sheet is fiscal policy more than it is monetary policy. He views the Fed’s balance sheet expansion as an enabler of irresponsible fiscal policy, which he believes to be the primary cause of inflation. Thus he would give Treasury more say over the Fed’s balance sheet, as the implementers of fiscal policy.

That would be a challenging project to undertake. Most importantly, the Fed operates in an “ample reserves” regime, which requires running a large balance sheet and ensuring sufficient liquidity is flowing through the financial plumbing to avoid any sort of crisis. As we saw in 2019 when reserve levels fell a little short and overnight rates surged, shrinking the balance sheet would require a structural change in the conduct of monetary policy. It would mean ending a policy framework that’s been settled over decades and replacing it with a new one that would take many years to implement.

As a reminder, the Fed’s balance sheet peaked at almost $9 trillion in early 2022 in the wake of the pandemic. The Fed then undertook a policy of quantitative tightening and allowed maturing assets to roll off the balance sheet. That has brought the balance sheet down to $6.6 trillion today.

The Confirmation Process

Warsh should be confirmable. He has the credentials to sit on the Fed and serve as chair. However, one complication standing in his way is the group of Republican Senators who have said they will not advance any Fed nominee until the ongoing criminal investigation of Chair Powell for his Senate testimony last year is dropped. That case represents a grave threat to the independence of the central bank, which is why they’ve struck such a hardline position. However, we expect that situation to be resolved and the nomination to proceed in short order.

A further issue is the prospect of Chair Powell staying on the Fed as a Governor for up to two years even after his term as chair ends. The more concerned Powell is about Fed independence, the more likely he will remain. We suspect that with Warsh as his replacement, Powell would step down at the end of his chairmanship and that President Trump will fill that governorship as well.

All of the above assumes the Supreme Court preserves Fed independence.