Despite his former reputation as an inflation hawk, Warsh has shown support for lower rates in recent months, suggesting he is more likely to align with the president than Jerome Powell.
US President Donald Trump said he plans to announce his choice for chairman of the Federal Reserve on Friday morning, a decision that could hold significant consequences for the central bank’s independence.
Betting odds have shifted towards Kevin Warsh, a former Fed governor, following a report in the Financial Times that he will be granted the top job.
For the past year, the president has aggressively attacked Fed Chair Jerome Powell, whose term as the head of the US central bank ends in May. Trump has long complained that the committee has held back economic growth by lowering rates too slowly. Policymakers at the Fed stress that their mandate is to ensure the stability of the US economy, meaning caution is required to stem inflation — which is already elevated in the wake of Trump’s tariffs.
Despite his former reputation as an inflation hawk, Warsh has shown support for lower rates in recent months, suggesting he is more likely to align with the president than Jerome Powell.
“I’ll be announcing the Fed chair tomorrow morning,” Trump told reporters on Thursday night as he went into a screening of the documentary “Melania” about his wife. “It’s going to be somebody that is very respected, somebody that’s known to everybody in the financial world. And I think it’s going to be a very good choice. I hope so.”
Trump added that “a lot of people think that this is somebody that could have been there a few years ago”, fuelling speculation that he had chosen Warsh, who was a finalist in the 2017 search for Fed chair that led to Powell's selection.
Threats to independence
Trump’s search, led by Treasury Secretary Scott Bessent, has narrowed to four known finalists. Alongside Warsh, contenders include: Christopher Waller, a current Fed governor; Rick Rieder, an executive with the financial firm BlackRock; and Kevin Hassett, director of the White House National Economic Council. Trump previously suggested Hassett was the frontrunner, only to recently say that he wanted him to remain in his current post.
Tensions between Trump and the central bank have been running high after the Justice Department subpoenaed the Fed earlier this month. The legal action is linked to a criminal investigation into testimony Chair Jerome Powell gave about a $2.5bn (€2.1bn) building renovation. It's the first time a sitting Fed chair has been investigated, and Powell has publicly criticised the probe as an attempt to influence monetary policy.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” said the chair in a video statement.
Powell's warning
Trump has long teased his choice for a new Fed chair, stressing that his nominee would slash interest rates that influence the supply of money, inflation, and the stability of the job market.
Even so, Powell may still have means to ensure the Fed’s independence. While his term as chair ends in roughly three months, Powell's term on the Fed's board of governors runs through 2028. He could choose to remain in that post, likely blocking Trump's ability to have his nominees control the majority of the seats on the board. Of the seven Fed governors, former President Joe Biden picked three of them, in addition to renominating Powell to a second term as chair.
If Powell stays on the board, he could also create a small procedural hurdle for Trump's ability to nominate someone new to the board. This would mean Trump would either have to choose an existing board member as chair, or replace Stephen Miran.
Miran is on leave from his job as chair of the White House Council of Economic Advisers to fill a term as governor that technically ends on Saturday. If Trump chooses to replace Miran, he could name someone new to the board.
At a Wednesday news conference, Powell declined to say whether he would leave the board. But he did offer some advice to any successor about balancing the need for independent judgment with public accountability.
“Don’t get pulled into elected politics — don’t do it,” Powell said. “Our window into democratic accountability is Congress. And it’s not a passive burden for us to go to Congress and talk to people. It’s an affirmative regular obligation.”
