Trump picks Kevin Warsh as Fed chair

President Donald Trump announced Friday that he was nominating Kevin Warsh to serve as the next chair of the Federal Reserve, positioning the former central bank governor to take a pivotal role in steering an institution that has faced a barrage of attacks from the administration over its reluctance to more aggressively lower interest rates.

In a post on Truth Social, Trump praised Warsh, saying, "He will go down as one of the GREAT Fed Chairmen, maybe the best."

"On top of everything else, he is ‘central casting' and will never let you down," the president wrote.

Trump repeated that line during remarks at the White House and said that while he did not get a commitment from Warsh to cut rates, he expected that he would do so.

"He certainly wants to cut rates, I've been watching him for a long time," Trump said.

Still, there are substantial questions about what direction Warsh will ultimately lead the central bank if he is confirmed by the Senate. For much of his career, Warsh was seen as a "hawk" who favored higher interest rates to keep inflation at bay. Only more recently, as he has sought the Fed job, has he begun calling for the lower interest rates that Trump prefers.

"The question is, which Warsh are we going to get?" said Michael Feroli, chief U.S. economist at J.P. Morgan.

Friday's announcement capped a drawn-out search process to find a replacement for Jerome Powell, whose term as chair of the central bank ends in May. Warsh, who served as a Fed governor from 2006 to 2011, edged out other contenders, including Kevin Hassett, one of the president's top economic advisers, and Christopher Waller, a current governor. Rick Rieder, a top executive at BlackRock, the world's largest asset manager, was also a finalist.

Warsh, who was a front-runner to be Fed chair during Trump's first term, will still need to be confirmed by the Senate in a process that could prove both lengthy and contentious. Almost instantly on Friday, Democrats and Republicans feuded publicly over the president's selection, foreshadowing a fight that will focus on whether Warsh can steer monetary policy independent from White House influence.

Sen. Tim Scott, R-S.C., chair of the Senate Banking Committee, said in a statement that Warsh would deliver on Trump's goal of "bringing accountability and credibility" to the Fed. The top Democrat on that panel, Sen. Elizabeth Warren of Massachusetts, sharply disputed that notion, saying Warsh's selection came only after he passed the president's "loyalty test."

And one Republican, Sen. Thom Tillis of North Carolina, said he would oppose the nomination of Warsh or any other individual to the Fed until the Justice Department resolved its investigation into Powell. That investigation, announced this month, concerned the current Fed chair's handling of renovations at the central bank's headquarters in Washington, a move that Powell has decried as politically motivated.

Tillis still described Warsh as a "qualified nominee with a deep understanding of monetary policy" in a post on social media. But, he added: "Protecting the independence of the Federal Reserve from political interference or legal intimidation is non-negotiable."

The selection comes at a crucial moment for the Fed, whose officials are facing relentless pressure from the Trump administration to provide relief to borrowers while grappling with a weakening labor market and persistent inflation. That dynamic has put the Fed's primary goals of stable prices and low unemployment in tension with each other, stoking internal divisions about what to do about rates.

Trump's top criteria for Fed chair was someone who supported significantly lower borrowing costs, which has been the biggest source of tension between Trump and Powell, whom the president repeatedly threatened to fire before he became the subject of a criminal investigation by the Justice Department.

Powell, who up until the investigation had brushed aside the president's attacks, hit back directly, accusing the administration of leveraging legal threats as retaliation against the institution for not lowering rates as quickly as Trump would like. Senate Republicans jumped to Powell's support, with some even going so far as to say they would block the confirmation of any Fed nominee until the issue was resolved.

As Fed chair, Warsh, 55, will have influence over the central bank's policy decisions, but far from total control. Interest rates are set by a 12-person committee, which includes all seven members of the Fed's board of governors as well as a rotating set of four presidents from the regional reserve banks. The president of the Federal Reserve Bank of New York has a permanent vote.

"It's not a committee of one, it's a committee of 12," said Tom Porcelli, chief economist at Wells Fargo. "He's going to have to make a plausible argument to the rest of the committee that the economy demands further rate reductions, and I think the hurdle for that is going to be pretty high."

On Wednesday, their first gathering of the year, officials opted to hold rates steady in a range of 3.5% to 3.75%. This week's pause followed three quarter-point cuts in the latter half of 2025. Despite those moves, rates are well above the roughly 1% level that Trump has called for in the past.

That disconnect has spawned other attempts by the Trump administration to pressure the Fed, beyond targeting Powell. The president is in the process of trying to fire one governor, Lisa Cook, over accusations that she committed mortgage fraud before joining the Fed. The Supreme Court this month heard arguments for that case and appeared skeptical of the president's argument that he had grounds to fire her. The justices also expressed unease about the incursion on the Fed's independence and the prospects of an adverse economic impact.

Warsh, who previously worked as an aide to President George W. Bush, has publicly backed the need for rate cuts, arguing that tariffs will not lead to persistently higher inflation.

In an early sign of some of the resistance that Warsh might face if he pursues substantially lower rates than the economy calls for, Trump's pick to join the central bank for a temporary stint, Stephen Miran, has struggled to persuade other policymakers to support the aggressive reductions that he has repeatedly voted for since being installed in September. Miran filled an opening left vacant by Adriana Kugler, a governor who resigned early from her position and was later found to have violated the Fed's trading rules.

Since leaving the Fed nearly 15 years ago, Warsh, who currently works with billionaire investor Stanley Druckenmiller and is also a senior fellow at the Hoover Institution at Stanford University, has emerged as a staunch critic of the central bank. Earlier this year, he called for "regime change in the conduct of policy," telling CNBC at the time that "the credibility deficit lies with the incumbents that are at the Fed, in my view." He has repeatedly hit out at the Fed for missing the inflation surge in the aftermath of the pandemic and is likely to support downsizing staff.

While at the Fed, Warsh established himself as a so-called "inflation hawk" who was worried about price pressures and urged higher rates. Inflation instead became stuck below the Fed's 2% target. He also advocated against the central bank's decision to buy U.S. government bonds after the global financial crisis as part of a so-called "quantitative easing" program aimed at shoring up the economy by lowering borrowing costs.

Warsh was instrumental in formulating the Fed's response to the crisis more broadly, including helping to broker the sale of Bear Stearns to JPMorgan Chase and arranging the government's bailout of American International Group, the insurance giant. Overall, he has supported the Fed maintaining a small balance sheet.

Warsh has since linked lower interest rates to a smaller balance sheet for the Fed, arguing that shrinking the central bank's footprint in financial markets - a move that would likely raise long-term borrowing costs - would give officials more space to reduce short-term ones.

As part of that plan, Warsh has called for a revamp of a 1951 agreement that established the Fed's monetary policy independence while giving Treasury control of government spending and taxation. He wants closer coordination between the Fed in terms of how it manages its balance sheet and the debt the Treasury Department issues in order to cover the government's obligations.

Still, Warsh's shifting views on monetary policy - and the timing of those shifts - are likely to fuel suspicion that his positions are driven by politics rather than economics. Warsh called for higher interest rates during both the Obama and Biden administrations, but has supported lower rates when Trump has been in office.

"His views on rate cuts and rate hikes have mostly to do with who is in office and election timing," said Skanda Amarnath, a former Fed staffer who now leads Employ America, an employment-focused research and advocacy group.

That history could make it harder for Warsh to win support for rate cuts from other Fed policymakers, and to maintain credibility with both investors and lawmakers in Congress. But if Warsh tries to establish his independence by moving slowly to cut rates, he risks being at odds with Trump just as Powell was.

Soon after announcing Warsh as his choice, the president returned to social media to acknowledge what had been known for some time: that he had considered a roster of additional Fed candidates, including Hassett, whom Trump said he had opted to keep at the White House because "he is doing such an outstanding job."

If confirmed by the Senate, Warsh will have to overcome doubts about how he will carry out his responsibilities at the helm of the Fed and the extent to which he will bow to pressure from Trump.

Glenn Hubbard, a Columbia economist who served as a top adviser to President George W. Bush, praised Trump's selection, but said Warsh would need to work to demonstrate his independence from the president.

"Warsh has the right experience, financial market knowledge and political skill to be very effective," Hubbard wrote in an email. "His challenges are preserving Fed independence and leading structural change in an institution he has (often rightly) criticized."

At risk is the public's confidence that the Fed is operating free of political meddling, an independence that economists and investors have long seen as crucial to the smooth functioning of financial markets and the overall strength of the economy.

In the past, Warsh has described the Fed's independence as "precious" and "essential," but he has also suggested that it should not operate entirely autonomously.

"History tells us that the independent operations in the conduct of monetary policy is essential," he told CNBC this summer. "But that doesn't mean the Fed is independent in everything else it does."

This article originally appeared in The New York Times.