Trump taps Kevin Warsh to lead the Federal Reserve

President Donald Trump plans to nominate former central banker Kevin Warsh to be the next chair of the Federal Reserve, in hopes that Warsh will follow his roadmap toward much lower interest rates.

Warsh served on the Fed's governing board from 2006 to 2011 after working as an economic adviser in the George W. Bush administration. He beat out other shortlist contenders for the Fed job, including National Economic Council director Kevin Hassett and Fed governor Chris Waller.

"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 wrote in a social media post. "On top of everything else, he is "central casting," and he will never let you down."

Trump has repeatedly complained that the current Fed chairman, Jerome Powell, is too timid about cutting rates, even though the Fed is supposed to operate at arm's length from the White House. Powell's term as Fed chair expires in May.

Warsh will undoubtedly face questions during his confirmation hearing about whether he's willing to buck pressure from the president.

Warsh has ties to Wall Street

During the financial crisis, Warsh served as the Fed's primary ambassador to Wall Street, where he made good use of the contacts he'd made while working at Morgan Stanley. He's currently a visiting fellow at Stanford's Hoover Institution. His wife is heiress to the Estee Lauder fortune.

While Trump is counting on Warsh to lower interest rates despite inflation that is well above the Fed's target, Warsh was on the opposite side of the fence during his previous term at the central bank. He frequently warned of inflation that didn't materialize, even as the unemployment rate hovered near 10%.

Warsh could join a divided Fed

While the Fed chair serves as the public face of the central bank, interest rates are set by a 12-member committee, consisting of the seven Fed governors and a rotating group of regional Fed bank presidents. In recent months, the committee has been divided over whether interest rates should be lower to cushion possible job losses or higher to curb stubborn inflation.

Since September 2024, the central bank has lowered its benchmark interest rate by 1.75 percentage points. But Trump has repeatedly called for bigger cuts, berating Powell for acting, in Trump's view, "too late."

In addition to jawboning the Fed, Trump has worked to replace members of its governing board with people who are more likely to do his bidding. When Fed governor Adriana Kugler abruptly resigned last summer, Trump appointed White House economist Stephen Miran to fill out the remaining months of Kugler's term. Since then, Miran has cast three lonely votes for super-sized rate cuts.

Trump has also tried to oust another member of the Fed's board, Lisa Cook, over unproven allegations of mortgage fraud. So far, that effort has been blocked by the U.S. Supreme Court.

Trump has challenged the Fed's independence

By design, the Fed is supposed to be insulated from White House interference, so policymakers can make necessary but sometimes unpopular choices, like raising interest rates to fight inflation. Trump has routinely trampled on that norm, insisting he knows better than Fed officials where interest rates should be.

President Trump and Fed Chairman Jerome Powell tour the Federal Reserve's headquarters renovation project in Washington, D.C., on July 24, 2025. The cost of the renovation became a flash point between the two.

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That's likely to come up during Warsh's confirmation hearing.

"It is difficult to trust that any Chair of the Federal Reserve selected by this president will be able to act with the independence required of the position," Sen. Mark Warner, D-Va., said in a statement. "This administration will levy charges against any leader who makes interest rate decisions based on facts and the needs of our economy rather than Trump's personal preferences."

Sen. Thom Tillis, R-N.C., has also threatened to vote against the confirmation of any Fed nominee until the Justice Department resolves its investigation of the central bank, which is seen as part of the president's pressure campaign.

While Warsh calls the independence of the Fed "important and worthy," he argued in a speech last April that the central bank has weakened that case by trying to do too much and losing sight of its inflation-fighting mission.

"Our constitutional republic accepts an independent central bank only if it sticks closely to its congressionally-directed duty and successfully performs its tasks," Warsh said in remarks to the International Monetary Fund. "We should remember that the revealed preference of the body politic is a deep distaste for inflation — and for bailouts and power grabs."

He warned that by keeping interest rates low for years, the Fed "contributed to an explosion of federal spending." That seems at odds with Trump's desire for even lower interest rates, so the government can keep running trillion-dollar deficits more cheaply.

Politicians tend to prefer lower interest rates, which can boost the economy in the short run but at a potential cost in long-run performance.

"Central bank independence is the solution that Congress and the President have chosen," a group of former Treasury secretaries, Fed governors, and prominent economists wrote in a friend of the court brief, "to protect against the risk that monetary policy will be mishandled."

One key question is whether Powell leaves the Fed board when his term as chair expires. That's the norm, but Powell could stay on as Fed governor until January 2028, denying Trump the chance to appoint another loyalist to the central bank's governing board.
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