Key Points
- President Trump nominated Kevin Warsh to replace Jerome Powell in May.
- Warsh openly supports Trump’s demand for aggressive interest rate cuts.
- The selection follows a criminal probe into Powell and tensions over Fed independence.
- Warsh believes AI productivity will naturally lower inflation, justifying lower rates.
President Donald Trump announced on Friday that he has selected Kevin Warsh to become the next Chairman of the Federal Reserve. Warsh, a former Fed governor and frequent critic of current policies, is set to replace Jerome Powell when his leadership term ends in May. This decision gives Trump a major opportunity to reshape the central bank right as he pushes for more direct control over U.S. monetary policy.
Trump praised his pick warmly, stating that Warsh is from “central casting” and predicting he will be a “great” leader who won’t let the country down. The nomination follows a long, public search where various candidates, including White House advisers and Wall Street insiders, appeared on television to essentially audition for the role by pitching their economic views.
The transition comes during a period of extreme friction between the White House and the Fed. Trump has repeatedly attacked Powell for not cutting interest rates fast enough to suit his administration.
The Justice Department even opened a criminal probe into Powell recently, a move Powell called a trick to force the bank to bend to the President’s will. Because of this hostility, Warsh may face a tough battle for confirmation in the Senate.
There is also speculation that Powell might refuse to leave the Fed entirely, choosing to stay on as a regular board member to protect the institution’s independence.
Warsh, 55, has a background that mixes Wall Street experience with academic theory. Currently at Stanford’s Hoover Institution, he has argued that the Fed needs a major overhaul. He agrees with Trump that rates should be lower and believes current officials are missing the big picture on artificial intelligence.
Warsh argues that the productivity boom from AI will naturally keep inflation down, meaning high interest rates aren’t necessary.
If confirmed, Warsh plans to shrink the Fed’s financial footprint and cut regulations on banks. Currently, interest rates are holding steady between 3.50% and 3.75%. The Fed paused cuts in January due to a stable job market, and investors now believe the next rate cut won’t happen until June, once the new chair takes over.
