Key Takeaways
- Kevin Warsh, President Donald Trump’s nominee for Fed chair, could be less aggressive about cutting interest rates than some of the other candidates Trump chose from.
- Warsh advocated lower interest rates, but would face constraints in making that a reality.
The nation’s next top banker could be less inclined to steeply cut interest rates than others who were vying for the job.
On Friday, President Donald Trump said on social media that former Federal Reserve Governor Kevin Warsh will be his nominee to chair the central bank. If approved by the Senate, Warsh will take over the position in May, when current Chair Jerome Powell’s leadership term expires.
Warsh served as a Fed governor between 2006 and 2011. He beat out several finalists for the job, including Trump Economic Advisor Kevin Hassett and BlackRock Executive Rick Rieder.
Warsh Will Likely Advocate for Rate Cuts, Just Not In a Vacuum
The selection could significantly affect the Federal Reserve’s monetary policy and future levels of the fed funds rate, which in turn influence borrowing costs for all kinds of loans. Warsh, a lawyer and banker, has appeared on television, praising Trump’s policies and advocating for rate cuts.
“We can lower interest rates a lot,” Warsh said on Fox News in October.
However, he may not be as “dovish” or as inclined toward rate cuts as some of the other candidates for the job were.
“Although Warsh has argued for lower rates recently, we do not view him as structurally dovish,” Matthew Luzzetti, chief economist at Deutsche Bank, wrote in a commentary in December.
The New Fed Chair’s Difficult Job
Warsh will take charge of the central bank at a crucial moment for the economy.
Members of the Fed’s 12-person policy committee that votes on interest rates have been divided. They are trying to decide whether to cut rates to support the faltering job market or keep them higher for longer to fight inflation that’s running above the Fed’s 2% annual target.
In recent months, the job market has slowed down significantly while inflation has remained stubbornly high, pulling the FOMC in opposite directions. The new Fed chair will take over that balancing act from Powell, who led the Fed to leave interest rates unchanged earlier this week. Before that, central bankers had cut interest rates by three-quarters of a point over their last three meetings of 2025; however, that’s likely fewer rate cuts than Trump would prefer.
“Jerome ‘Too Late’ Powell again refused to cut interest rates, even though he has absolutely no reason to keep them so high,” Trump wrote in a social media post Thursday, following the Fed’s decision to stand pat. “We should have a substantially lower rate.”
Fed chairs are influential in policy decisions, but don’t make them singlehandedly, and must win over a majority of the Federal Open Market Committee to their position. That job will be complicated by political tensions: Trump’s demands for steep interest rate cuts, as well as his administration’s criminal investigation into members of the committee, have raised alarms among Fed officials and lawmakers about the central bank’s independence from White House control.
Fed officials and economists have warned that if Trump and future presidents successfully pressure the central bank to sharply cut interest rates, the public would begin to doubt the central bank’s ability to control inflation—a belief that could become a self-fulfilling prophecy.
As a result, the Warsh may face pressure not to cut rates simply to prove the Fed’s inflation-fighting credibility.
“The market could look to test the next Fed chair’s independence and the credibility of his commitment to achieving the inflation target,” Lutezzi wrote. “These bona fides always need to be earned by an incoming chair.”