What we're covering here
• President Donald Trump said Friday he is nominating Kevin Warsh to be the next Federal Reserve chair. Warsh will take over from Federal Reserve Chair Jerome Powell, whose term as chair ends in May. The role requires Senate confirmation.
• The announcement caps an extensive search that started in September and was spearheaded by Treasury Secretary Scott Bessent, who whittled down a list of half a dozen candidates and presented four finalists to the president.
• Trump has castigated Powell for months, calling him a “numbskull,” a “moron” and a “jerk” for not lowering interest rates more quickly. His administration also launched a criminal investigation of Powell and the Fed earlier this month, which led Powell to issue an extraordinary rebuke of Trump’s efforts to politicize the independent central bank.
Stocks open lower after Trump announces Warsh as Fed chair pick
US stocks opened slightly lower Friday as Wall Street digested the announcement that former Fed Governor Kevin Warsh is President Donald Trump’s nominee to lead the Federal Reserve.
The Dow was down 147 points, or 0.3%. The broader S&P 500 fell 0.32%. The tech-heavy Nasdaq Composite slid 0.42%.
The 10-year Treasury yield ticked higher. The US dollar index rose 0.35%, recouping some losses after sliding earlier this week.
“The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is … the new Federal Reserve Chair nominee today offers exactly that,” Francesco Pesole, FX strategist at ING, said in a note.
“Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views,” Pesole said.
“Hawkish” refers to someone who tends to prefer to keep rates higher to combat inflation. Higher rates can boost the dollar.
Gold futures sank 5.1% and silver futures plunged 14.5%, pulling back after sharp rallies in recent weeks.
Thierry Wizman, global FX and rates strategist at Macquarie, said in a note that he does not think Warsh is as hawkish as the market expects.
“Warsh is not a ‘hawk’ these days,” Wizman said. “Warsh has been Trump’s ‘monetary policy twin’ from day one.”
“Trump’s explicit criteria for the new chair was someone who ‘believes in lower interest rates, by a lot,’” Wizman said. “That last fact alone should make traders wary of the prospect that Warsh is a ‘hawk.’”
Stocks and bonds fall as Trump announces an inflation hawk as his pick for Fed chair
US stock futures were slightly lower after President Donald Trump announced Kevin Warsh as his nominee for Federal Reserve chair.
Although Warsh has recently embraced Trump’s demands for lower interest rates, he has a well-earned reputation as an inflation hawk – meaning he typically leans toward higher rates to prevent prices from rising out of control.
Markets didn’t have a significant reaction to Warsh’s pick, but they certainly aren’t acting like Trump’s new Fed chair is going to do the president’s bidding and start slashing rates when he joins the central bank in the spring.
Dow futures fell 130 points, or 0.3%. S&P 500 futures moved 0.4% lower. And futures for the tech-heavy Nasdaq Composite were down 0.5%.
Stocks tend to rise when rates are lower, because rate cuts reduce businesses’ borrowing costs and pad their profits. They tend to fall when rates rise, because higher interest rates eat into companies’ bottom lines.
The US dollar reversed course and gained 0.1% against other major currencies after a steadily dropping throughout January. Treasury yields rose slightly as investors sold off bonds.
Treasuries tend to follow Fed interest rates – so higher rates would support higher bond yields. The move was far from dramatic, but the benchmark 10-year yield rose 0.01 points to 4.25%.
Canadian Prime Minister Mark Carney, a former central banker, praises Warsh
Mark Carney, Prime Minister of Canada, made an unusual statement of support for Kevin Warsh, President Donald Trump’s pick for Federal Reserve chair.
“Kevin Warsh is a fantastic choice to lead the world’s most important central bank at this crucial time,” Carney said in a social media post. “Kevin Warsh is the best choice to lead the world’s most important central bank at this pivotal moment.”
Carney was the leader of the Bank of England for nearly seven years until March 2020. He also oversaw the Bank of Canada in a stint that overlapped with Warsh’s time as a Fed governor.
Nevertheless, support for the independent, apolitical Federal Reserve is unusual for a leader of a foreign country.
Fed's Waller reveals why he dissented at this week's meeting. Some say it was political
The Federal Reserve should have lowered interest rates again this week because there hasn’t been any job growth over the past year, Governor Christopher Waller said in a statement released Friday.
Waller was one of two Fed policymakers on Wednesday who cast a dissenting vote on the majority’s decision to hold rates steady for the first time since July. He was joined by Fed Governor Stephen Miran, both appointed by President Donald Trump, who preferred to lower rates by a quarter point.
“Last year’s data will be revised downward soon to likely show that there was
virtually no growth in payroll employment in 2025. Zero. Zip. Nada,” Waller wrote. “This does not remotely look like a healthy labor market.”
The Fed this week broke a streak of three back-to-back rate cuts that began in September. One key factor in the Fed’s hesitation to lower rates last year was the potential effect on inflation of Trump’s widespread tariffs. Waller said that was also another reason why he would have wanted to cut again this week, stating “inflation excluding tariff effects is running close to the (Fed’s) 2 percent target and on a path to sustainably reach that goal.”
But Waller was also one of the four finalists to become Fed chair — a nomination that ultimately went to long-time Trump ally Kevin Warsh.
Several commentators have said Waller’s dissent may have been political, in a last-ditch attempt to clinch the nomination.
“Waller’s shift is particularly critical for markets given his status as a Fed chair contender; his break from the majority raises questions about whether the move was driven by evolving economic data or shifting political considerations,” Kevin Ford, FX and macro strategist at payments firm Convera, said in commentary issued Thursday.
Wholesale inflation in December was hotter than expected
New inflation data released Friday shows that it won’t be easy for Kevin Warsh, President Donald Trump’s pick for Federal Reserve chair, to argue for lower interest rates.
The Producer Price Index, which captures inflation at the factory gate, rose 0.5% in December from the prior month, the Bureau of Labor Statistics reported Friday, higher than the 0.25% gain economists projected in a poll by data firm FactSet.
On a yearly basis, PPI rose 3% in December, higher than expectations for a 2.8% rate and unchanged from November’s figure.
A measure that strips out volatile food and energy prices came in even hotter than expected, rising 0.7% during the same period, compared to the 0.3% gain economists projected.
The Fed’s goal is for consumer inflation to be at 2% on an annual basis, which it hasn’t reached in five years. Producer inflation sometimes serves a bellwether for price increases at the consumer level.
Trump thanks Kevin Hassett, a finalist for Fed chair
National Economic Council Director Kevin Hassett, who until recently was the presumed front-runner to replace Jerome Powell as Federal Reserve chair, got a nice consolation prize after he lost out to Kevin Warsh: praise from President Donald Trump in a Truth Social post.
“A great Chairman he would have been but, quite honestly, he is doing such an outstanding job working with me and my team at the White House, that I just didn’t want to let him go,” Trump said. “Kevin is indescribably good so, as the expression goes, ‘if you can’t do better, don’t try to fix it!’ Thank you Kevin for doing such a great job!”
Hassett has been a constant presence on television, advocating for Trump’s often radical economic policies. He seemingly fell out of favor earlier this month after the Trump administration launched an extraordinary and widely criticized criminal investigation into Powell, and Hassett’s close ties to Trump seemed to kill his chances of confirmation.
In recent weeks, Trump started to suggest that Hassett was out of the running, noting he likes him in the NEC role.
Sen. Thom Tillis: I won't consider Warsh until Powell investigation resolved
President Donald Trump announced he would nominate Kevin Warsh to become the next Fed chair. One hang-up: He may not have the votes in the Senate Banking Committee. Not yet, anyway.
Republican Sen. Thom Tillis, a key vote on the committee, reiterated his position Friday that the committee should not consider a nominee to replace Fed Chair Jerome Powell until the Trump administration’s extraordinary criminal investigation of Powell is resolved. Democratic Sen. Elizabeth Warren, the committee’s ranking member, made a similar comment Friday.
“My position has not changed: I will oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman, until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved,” Tillis wrote in a social media post.
“Kevin Warsh is a qualified nominee with a deep understanding of monetary policy,” he said. “However, the Department of Justice continues to pursue a criminal investigation into Chairman Jerome Powell based on committee testimony that no reasonable person could construe as possessing criminal intent.”
Trump risks "getting duped" by Warsh
Reaction to Kevin Warsh’s nomination for Federal Reserve chair so far essentially boils down to this: He’s eminently qualified, but significant questions remain about whether he’ll act on policy fundamentals or the whims of President Donald Trump.
Warsh was a notorious inflation hawk during his time at the Fed, suggesting that he may favor higher interest rates, not lower rates like Trump has demanded. Yet Warsh in recent months has switched sides and advocated publicly for Trump’s preferred policy.
“He’ll make a good Fed chair, just how good depends on how much of the Fed’s independence he is able to preserve,” said Mark Zandi, chief economist at Moody’s Analytics. “He knows the institution and everyone in global central banking circles. But the question is whether he will be strong enough to ensure interest rates are set based on the economy and not politics.”
Renaissance Macro Research put it more succinctly in a social media post Friday morning: “Kevin Warsh has been monetary policy hawk his entire career,” the group said. “His dovishness today stems from convenience. The President risks getting duped.”
Democratic Senator Elizabeth Warren, ranking member of the Senate Banking Committee, said Friday she feared Warsh “passed the loyalty test” to get Trump’s support, and she urged other members not to consider his nomination until Trump drops his legal action against Fed Chair Jerome Powell and Fed Governor Lisa Cook.
Powell has advice for his successor
At his news conference Wednesday following the January policy meeting, Federal Reserve Chair Jerome Powell was asked by CNN’s Matt Egan what words of wisdom he would give his successor.
The Fed chair paused for a moment, chuckled, and said he had three pieces of advice.
- Stay out of elected politics.
- Be accountable to Congress and work diligently to build relationships with the Fed’s overseers.
- Respect the dedicated professionals who work hard every day to promote the independent mission of the Federal Reserve.
It was a touchingly human and thoughtful response. And it spoke volumes about the legacy Powell plans to leave at the institution he’s served for 14 years – nine as its chair. On Wednesday, he summed it up as his commitment to the “public well being” and staying out of politics.
Read more here.
Trump: Kevin Warsh is "central casting" for Fed chair
President Donald Trump’s Truth Social post nominating Kevin Warsh to become the next Fed chair was like an encyclopedia article, listing credential after credential: Warsh went to Stanford, got his law degree at Harvard, became the youngest Fed governor, worked at Morgan Stanley in the mergers and acquisitions department…
But Trump reserved a couple lines of praise for his pick at the end, including one of his favorite go-to compliments for his nominees: Warsh just looks the part, Trump argued.
“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 said. “On top of everything else, he is ‘central casting,’ and he will never let you down. Congratulations Kevin!”
Trump nominates Kevin Warsh for Fed chair
President Donald Trump said he is nominating Kevin Warsh to be the 17th chair of the Federal Reserve after Jerome Powell’s term ends in May.
“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. On top of everything else, he is “central casting,” and he will never let you down,” Trump wrote on his social media platform Friday morning.
Warsh is a somewhat conventional candidate for Fed chair: a former Fed governor who was previously under consideration to be Treasury secretary in Trump’s second term and was a candidate for the top job at the Fed during Trump’s first term. Warsh was appointed to the Fed in 2006 at the age of 35, making him the youngest person to have ever served on the Fed’s powerful board.
Warsh, now 55, has recently shifted his stance on monetary policy. A former inflation hawk, Warsh now favors lower interest rates, according to numerous public statements he’s made in recent months as Trump launched a reality-show-like spectacle for his Fed chair decision. He’s also called for overhauling the central bank’s workforce.
Gold and silver prices tumble as markets digest Trump's Fed pick
The price of precious metals fell sharply Friday on the news that President Donald Trump is likely to nominate Kevin Warsh to be the next Federal Reserve chair.
At 6:16 a.m. ET, gold futures were 3.8% down at $5,152, while silver had plunged 11.1% to $101.7. Both metals are seen as safe-haven investments.
Neil Wilson, a strategist at UK trading platform Saxo Markets, attributed the price moves to Warsh’s likely appointment.
“Markets (are) assessing that a more conventional candidate who’s not a complete Trump stooge and is negative for the (recent) speculative gold ramp-up,” he wrote in a note.
Warsh served as a Fed governor for five years after being nominated by President George W. Bush.
Trump wants rate cuts, but Warsh has a hawkish past
President Donald Trump has made clear that he wants the next Fed chair to cut interest rates quickly to stimulate the economy. In that case, Kevin Warsh is kind of an odd choice.
Although Warsh has publicly stated – repeatedly – that he agrees with Trump that interest rates are too high, he built a reputation during his time at the Fed for being hawkish on inflation. In other words, he favored interest rate hikes, not cuts.
“My takeaway from his time on the Fed: his first instinct is hawkish and rarely saw a potential rate hike he didn’t like,” said Joe Brusuelas, RSM US chief economist. “He will disappoint a president that wants extremely low interest rates.”
Tim Mahedy, chief economist at Access Macro, agreed, noting Warsh also has supported selling Treasuries from the Fed’s balance sheet, which could raise raise bond yields – and loans tied to those yields, such as mortgages.
“If Warsh got his way, his policies would likely run counter to what the President wants,” he said.
Although the hawkishness would have been prudent during the recent inflation crisis, critics say Warsh’s instinct to raise rates in the aftermath of the 2008-2009 financial crisis was misplaced.
“During the defining crisis of our time – The Great Financial Crisis – Kevin Warsh continued to extoll inflation as the primary risk,” Brusuelas said. “He truly did not an understand the nature, magnitude and implications of the depression like shock that occurred.”
These were the top four candidates
President Donald Trump said late Thursday “I’m going to be announcing, I think, a really great choice tomorrow” regarding his pick for Federal Reserve chair.
While arriving at the premier of first lady Melania Trump’s documentary, he told reporters his nominee is “somebody that is very respected, somebody that’s known to everybody in the financial world,” but did not identify the person.
Kevin Warsh, a former Fed governor and finalist for the role, was at the White House Thursday, according to a person familiar with the matter.
However, White House spokesman Kush Desai told CNN in a statement earlier Thursday: “President Trump will make an announcement about his pick for the Federal Reserve at the appropriate juncture. Any and all reporting on the Federal Reserve Chairman nominations process until then is a waste of everyone’s time.”
For months, the Trump administration has teased a long list of candidates to take over when Powell’s term as chair ends in May.
Treasury Secretary Scott Bessent studiously led the search for the key economic role, presenting President Donald Trump with four final candidates ahead of the expiration of Powell’s term.
The final four were: National Economic Council Director Kevin Hassett; former governor Warsh; Fed Governor Christopher Waller; and Rick Rieder, BlackRock’s chief bond investment manager.
