President Donald Trump said Friday he will nominate former Federal Reserve official Kevin Warsh as the next chair of the Federal Reserve, a move that could bring sharp changes to the powerful agency and potentially pull it closer to the White House, weakening its long-standing independence from day-to-day politics, news agency Associated Press reported.
Powell’s term ending, Trump renews rate criticism
Warsh would replace current chair Jerome Powell when his term expires in May. Trump had appointed Powell in 2017 but has repeatedly criticised him this year for not cutting interest rates fast enough.
A return to the Fed board
The nomination, which needs Senate confirmation, marks a return for Warsh, 55, who served on the Fed’s board from 2006 to 2011 and was the youngest governor in its history, appointed at age 35. He is currently a fellow at the Hoover Institution and a lecturer at the Stanford Graduate School of Business.
Warsh is, in some ways, an unusual pick for Trump. He has long been considered a hawk in Fed parlance — someone inclined to favour higher interest rates to keep inflation in check. Trump has argued the Fed’s key rate should be as low as 1 per cent, well below the current level of about 3.6 per cent, a view few economists support.
While serving as a governor, Warsh opposed some of the ultra-low rate policies adopted during and after the 2008–09 Great Recession and repeatedly warned inflation could accelerate, even as it stayed subdued for years. More recently, however, in speeches and opinion columns, Warsh has said he supports lower rates.
Why the Fed chair matters
The announcement follows an extended and unusually public search, underlining how consequential the choice is for Trump and for the economy. The Fed chair is among the world’s most powerful economic policymakers, responsible for fighting inflation while supporting maximum employment. The central bank also serves as the country’s top banking regulator.
Over time, Fed rate decisions shape borrowing costs across the economy, affecting mortgages, car loans and credit cards.
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Path to the chair
Initially, Warsh would take a seat on the Fed’s governing board that was temporarily filled by Stephen Miran, a White House adviser appointed by Trump in September. Once on the board, Trump could then elevate Warsh to chair when Powell’s term ends in May.
US Senator Warren says Trump’s Fed pick is step to seize control
Democratic US Senator Elizabeth Warren said Trump’s choice to nominate Warsh to head the Federal Reserve represents the president’s latest step to seize control of the institution.
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