President Donald Trump named his nominee for Federal Reserve chairman Friday morning, and it’s front-runner Kevin Warsh.
Warsh has been among the favorites to replace current Chairman Jerome Powell for many months, particularly after Trump said he was impressed by “both Kevins” (Warsh and Kevin Hassett, director of the U.S. National Economic Council) during the interview process. Trump confirmed Warsh’s nomination to head the central bank on Truth Social on Friday, writing that he “has known Kevin for a long time and [had] there is no doubt that he will remain among the GREAT Fed Presidents [sic]maybe the best.
Warsh has the credentials the market likes to see at the top of the central bank: He knows the inner workings of the central bank from his tenure on the Board of Governors from 2006 to 2011, and he was a key player in then-President Ben Bernanke’s inner circle as the country went through a financial crisis.
He knows Washington, having been brought there by President George Bush in 2002, when he was special assistant to the president for economic policy and executive secretary of the National Economic Council.
He also has the private sector experience that Trump favors. (Scott Bessent, pre-Treasury Secretary, was CEO of global hedge fund Key Square Capital Management). Between 1995 and 2002, Warsh worked for Morgan Stanleyhis latest role being that of vice president and executive director.
But what do we know about Warsh beyond his CV?
His plans for the Fed echo rhetoric Bessent has been pushing for some time (the duo has occupied the same Wall Street circle for years): The Fed should take a more discreet approach. Investors may not like this at first; they have become accustomed to reviewing the many updates on the Fed’s thinking through press conferences, public appearances, the Beige Book, and tools like the dotplot.
Having been introduced to the Fed under Bernanke, Warsh is also likely to follow in his mentor’s leadership footsteps. While Powell receives praise for his ability to herd the many cats of the Federal Open Market Committee (FOMC) toward consensus, the Harvard and Stanford alumni might instead strategize with a smaller group of allies, before expanding his thinking to a broader group.
As for Warsh’s current inner circle, in 2002 he married Jane Lauder, granddaughter of Estée Lauder and heiress to the beauty empire. Perhaps unusually for Washington’s elite, they are investing time and money into improving the longevity of their pets, taking inspiration from their cockapoo named Thaddeus. In November, Lauder’s (designated as one of Fortune The most powerful women), investment firm TAW Ventures, has led a fundraising round for British fresh dog food brand Marleybones.
Comprehensive approach
With Warsh on the podium after future FOMC meetings, the narrative is about to change. Trump has made it clear that his nominee will be dovish, meaning the new president will likely have a more optimistic outlook.
Warsh criticized Powell’s wait-and-see approach, writing in a WSJ opinion article late last year, the Fed was expected to “abandon its forecast for stagflation over the next two years, as if below-average growth and inflation 40% above target were the best that could be done.” The Fed nominee is bullish on the United States, as is JPMorgan CEO Jamie Dimon (who, incidentally, argued Warsh), confident that the country will continue to show strong growth thanks to its entrepreneurship – AI being a key example.
Economists have also suggested that the Fed is getting too bogged down in the short term, changing its interest rate expectations daily when in reality the The third, often forgotten aspect of the Fed’s mandate is to “moderate long-term interest rates.” Warsh’s news conferences might instead focus on broader macroeconomic topics or headwinds, rather than letting analysts speculate on the meaning of minor changes in spoken language.
Traditional communication approach
Warsh is not flashy; he likes to eat without fuss while reading the newspaper and often finds himself on the sidelines of economic conferences rather than on stage. Other candidates had secured a slew of media interviews, but Warsh held back.
Indeed, the key question regarding Warsh’s candidacy is whether he can convince markets of his political independence and, by extension, central bank autonomy. Trump’s ongoing pressure campaign has raised fears among many that he would nominate a Yes Man, who would sail through the Republican-controlled Senate confirmation process and lower rates to unhealthy levels to appease the president, harming the economy. (Fed watchers have already gotten a taste of how a Trump 2.0 appointee might fare at the FOMC, following last year’s confirmation of White House economic adviser Stephen Miran, who has since pushed for base rate cuts as Fed governor).
Powell’s advice to his successor is to avoid politics as much as possible, and Warsh has made clear that he wants the Fed to rein in its public exposure (something sources have said Fortune they will be only too happy to be of service).
“Fed leaders would be wise to not share their latest thoughts,” Warsh said early last year, adding that members were becoming “prisoners of their own words.” It’s a sign that the Fed may be returning to its roots of “never apologize, never explain,” which may be uncomfortable for markets in the short term, but could potentially ease tensions with the White House in the long term.
