Trump's choice of Warsh to lead Fed could reshape the world's most
influential central bank
[January 31, 2026] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — President Donald Trump's nomination of Kevin Warsh to
chair the Federal Reserve could bring about sweeping changes at a
central bank that dominates the global economy and markets like no
other.
Warsh, if approved by the Senate, will be under close scrutiny from
financial markets and Congress given his appointment by a president who
has loudly demanded much lower rates than many economists think are
justified by economic conditions. Whether he can maintain the Fed's long
time independence from day-to-day politics while also placating Trump
will be a tremendous challenge.
Still, former associates and friends of Warsh say that he has the
intellectual heft and people skills to potentially pull it off. His
family also has connections to Trump that could reduce the pressure from
the White House.
Warsh has “a judicious temperament and both the intellectual
understanding but also the hopefully diplomatic talents to navigate what
is a challenging position at this point,” said Raghuram Rajan, an
economics professor at the University of Chicago and formerly head of
India's central bank.
Warsh would replace current chair Jerome Powell when his term expires in
May. Trump chose Powell to lead the Fed in 2017 but this year has
relentlessly assailed him for not cutting interest rates quickly enough.
"I have known Kevin for a long period of time, and have no doubt that he
will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump
posted on social media Friday. “On top of everything else, he is
‘central casting,’ and he will never let you down.”
Trump said later Friday in the Oval Office that he didn't ask Warsh to
commit to cutting rates, calling such a question “inappropriate" and
adding, “I want to keep it nice and pure.”
But Trump added, “But he certainly wants to cut rates.”
The appointment, which requires Senate confirmation, amounts to a return
trip for Warsh, 55, who was a member of the Fed's board from 2006 to
2011. He was the youngest governor in history when he was appointed at
age 35. He is currently a fellow at the right-leaning Hoover Institution
and a lecturer at the Stanford Graduate School of Business.
In some ways, Warsh is an unlikely choice for the Republican president
because he has long supported higher interest rates to control
inflation. Trump, by contrast, has said the Fed’s key rate should be as
low as 1%, a level few economists endorse, and far below its current
level of about 3.6%.
During his time as governor, Warsh objected to some of the low-interest
rate policies that the Fed pursued during and after the Great Recession
of 2008-09. He also often expressed concern at that time that inflation
would soon accelerate, even though it remained at rock-bottom levels for
many years after that recession ended.
More recently, however, in speeches and opinion columns, Warsh has
voiced support for lower rates, seemingly coming in line with Trump's
point of view.
Markets and members of Congress react
Financial markets reacted in ways that suggest investors expect Warsh
could keep rates a bit higher over time. The dollar and yields on
long-term U.S. Treasurys ticked higher. U.S. stocks fell about 0.5%. The
biggest moves were in the volatile metals markets, where gold dropped
more than 5% and silver sank more than 13%.
In Congress, Sen. Thom Tillis, a North Carolina Republican, reiterated
in a social media post that he will oppose Warsh's nomination until a
Justice Department investigation into Powell is resolved.
Tillis is on the Senate committee that will consider Warsh's nomination.
He added that Warsh is a “qualified nominee,” but stressed that
“protecting the independence of the Federal Reserve from political
interference or legal intimidation is non-negotiable.”
Tillis’s opposition could complicate the confirmation process. Asked
late Thursday whether Warsh could be confirmed without Tillis’s support,
Senate Majority Leader John Thune said, “probably not.”
Separately, Democratic Sen. Elizabeth Warren of Massachusetts, the
highest-ranking Democrat on the committee, accused Warsh of reshaping
his views to appease Trump ahead of his nomination.
“I don’t know how to interpret that, except to say, that’s exactly what
a sock puppet does,” she said. “If Donald Trump says it, then Kevin
Warsh echoes it, even though it contradicts everything he had done for
years.”
[to top of second column] |
Kevin Warsh, speaking to the media about his report on transparency
at the Bank of England, in London, Dec., 11, 2014. (AP
Photo/Alastair Grant, Pool, File)
 Changes coming to Fed?
Warsh has frequently criticized the Fed for its ownership of
trillions of dollars in government and mortgage-backed securities,
which it accumulated after the Great Recession and during the
pandemic.
Warsh has charged that the massive bond-buying, which was intended
to lower longer-term interest rates and boost the economy, enabled
Congress to ramp up spending without concern for higher borrowing
costs.
Reducing the Fed's $6.6 trillion balance sheet, however, will be a
fraught exercise because banks have become accustomed to the large
amounts of cash in the financial system that it provides.
Warsh has also said the Fed's economic models wrongly assume that
rapid economic growth threatens to elevate inflation. Instead,
“Inflation is caused when government spends too much and prints too
much,” he wrote in a November column in The Wall Street Journal.
Controlling the Fed
The announcement comes after an extended and unusually public
search. The chair of the Federal Reserve is tasked with combating
inflation in the United States while also supporting maximum
employment. The Fed is also the nation’s top banking regulator.
The Fed’s rate decisions, over time, influence borrowing costs
throughout the economy, including for mortgages, car loans and
credit cards.
Trump has sought to exert more control over the Fed. In August he
tried to fire Lisa Cook, one of seven governors on the Fed’s board,
in an effort to secure a majority of the board. Cook, however, sued
to keep her job, and the Supreme Court, in a hearing last week,
appeared inclined to let her stay in her position while her suit is
resolved.
Powell revealed this month that the Fed had been subpoenaed by the
Justice Department about his congressional testimony on a $2.5
billion building renovation. Powell said the subpoenas were
“pretexts” to force the Fed to cut rates.
Trump's economic policies
Warsh has expressed support for the president's economic policies,
despite a history as a more conventional, pro-free trade Republican.
In a January 2025 column in The Wall Street Journal, Warsh praised
Trump's deregulatory policies and potential spending cuts, which he
said would help bring down inflation. He has also suggested that
artificial intelligence will boost productivity, making the economy
more efficient while reducing inflation. Lower inflation would allow
the Fed to lower rates.
In December, Trump wrote on social media of the need for lower
borrowing costs and said, “Anyone who disagrees with me will never
be the Fed chairman!”
Potential challenges and pushback
If confirmed, Warsh would face challenges in pushing interest rates
much lower. The chair is just one member of the Fed’s 19-person
rate-setting committee, with 12 of those officials voting on each
rate decision. The committee is already split between those worried
about persistent inflation, who’d like to keep rates unchanged, and
those who think that recent upticks in unemployment point to a
stumbling economy that needs lower interest rates to bolster hiring.
Financial markets could also push back. If the Fed cuts its
short-term rate too aggressively and is seen as doing so for
political reasons, then Wall Street investors could sell Treasury
bonds out of fear that inflation would rise. Such sales would push
up longer-term interest rates, including mortgage rates, and
backfire on Warsh.
Trump considered appointing Warsh as Fed chair during his first
term, though ultimately he went with Powell. Warsh’s father-in-law
is Ronald Lauder, heir to the Estee Lauder cosmetics fortune and a
longtime donor and confidant of Trump’s.
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