Trump appoints Kevin Warsh, a former Federal Reserve official, as the next Fed chairman to replace Powell

WASHINGTON (AP) — President Donald Trump said Friday he will nominate former Federal Reserve official Kevin Warsh to be the next head of the Federal Reserve, a decision likely to lead to sharp changes at the powerful agency that could move it closer to the White House.

Warsh will replace current Chairman Jerome Powell when his term ends in May. Trump chose Powell to lead the Fed in 2017, but this year he has relentlessly attacked him for not cutting interest rates fast enough.

“I have known Kevin for a long time, and I have no doubt that he will become one of the great Fed chairs, perhaps the best,” Trump said on his website, Truth Social. “Above all else, it is a central cast, and it will never let you down.”

The appointment, which requires Senate approval, marks a return trip for Lorsch, 55, who was a member of the Federal Reserve Board of Directors from 2006 to 2011. He was the youngest governor in history when he was appointed at the age of 35. He is currently a fellow at the right-leaning Hoover Institution and a lecturer at Stanford University’s Graduate School of Business.

In some ways, Warsh is an unlikely choice for the Republican president because he has long been a hawk, in Fed parlance, or someone who typically supports higher interest rates to keep inflation under control. By contrast, Trump has said the Fed’s key interest rate should be as low as 1%, well below its current level of about 3.6%, a position few economists support.

During his tenure as governor, Warsh objected to some of the Fed’s low-interest rate policies during and after the Great Recession of 2008-2009. He also often expressed concern at the time that inflation would soon accelerate, despite it remaining at low levels for many years after the recession ended.

But more recently, Warsh has said in speeches and opinion columns that he supports lower interest rates.

Early reaction

Markets fell sharply overnight, but appeared to stabilize early Friday following the Federal Reserve Chairman’s announcement. Precious metals, which have been on a tear in recent months, remained sharply lower on Friday. Gold fell approximately 5% and silver fell 13%. The dollar, which declined over the past year, regained some of its gains.

In Congress, the initial reaction was along party lines. Senator Tim Scott, a Republican from South Carolina and chairman of the banking committee that will consider Warsh’s nomination, praised Trump’s choice.

“The Fed’s independence remains of the utmost importance, and I am confident that Kevin will work to instill confidence and credibility in the Fed’s monetary policy,” Scott said.

“Kevin Warsh — who cared more about helping Wall Street after the 2008 crash than millions of unemployed Americans — has apparently passed the loyalty test,” said Democratic Senator Elizabeth Warren of Massachusetts, the committee’s top Democrat.

Warsh beat out several other candidates, including Trump’s chief economic adviser, Kevin Hassett, investment director Rick Reeder, and current Federal Reserve Governor Christopher Waller.

Control the Federal Reserve

Warsh’s appointment could be a big step toward Trump asserting more control over the Federal Reserve, one of the few remaining independent federal agencies. While all presidents influence Fed policy through appointments, Trump’s rhetorical attacks on the central bank have raised concerns about its status as an independent institution.

This announcement comes after an extensive and unusual public search that emphasized the importance of the decision for Trump and the potential impact it could have on the economy. The Chairman of the Federal Reserve is one of the world’s most powerful economic officials, charged with combating inflation in the United States while supporting maximum employment. The Federal Reserve Bank is also the country’s top banking regulator.

The Fed’s interest rate decisions, over time, affect borrowing costs throughout the economy, including mortgages, auto loans, and credit cards.

For now, Warsh will likely take a seat on the Fed’s Board of Governors that was temporarily held by Stephen Meiran, the White House counsel appointed by Trump in September. Once on the board, Trump could then elevate Warsh to chair when Powell’s term ends in May.

Trump’s economic policies

Since Trump’s reelection, Warsh has expressed support for the president’s economic policies, despite his history as a more traditional Republican and a supporter of free trade.

In a January 2025 Wall Street Journal column, Warsh wrote that “the Trump administration’s strong regulatory policies, if implemented, would be anti-inflationary. Cuts in government spending—inspired by the Department of Government Efficiency—would also significantly reduce inflationary pressures.” Lower inflation would allow the Fed to implement the interest rate cuts the president wants.

Trump seeks to exercise more control over the Federal Reserve. In August, he tried to fire Lisa Cook, one of the seven governors on the Fed’s board, in an attempt to secure a board majority. However, Cook has sued to keep her job, and the Supreme Court, at a hearing last week, appeared inclined to let her remain in her position until her suit is resolved.

Economic research has found that independent central banks have better records of controlling inflation. Elected officials, like Trump, often demand lower interest rates to boost growth and employment, which can lead to higher prices.

Trump has said he will appoint a Fed chairman who will lower interest rates to lower government borrowing costs and lower mortgage interest rates, although the Fed does not directly decide those costs.

In December, he wrote on social media about the need to lower borrowing costs and said: “Anyone who disagrees with me will never become Fed Chairman!”

Potential challenges and resistance

If the Senate confirms Warsh’s appointment, he will face challenges in pushing interest rates much lower. The chairman is just one member of the Fed’s 19-person interest rate-setting committee, with 12 of those officials voting on every interest rate decision. The committee is already divided between those who are concerned about persistent inflation, who want to keep interest rates unchanged, and those who believe recent rises in unemployment point to a faltering economy that needs lower interest rates to boost employment.

It is also possible that financial markets will decline. If the Fed cuts the short-term interest rate too sharply and is seen as doing so for political reasons, Wall Street investors may sell Treasuries for fear of higher inflation. Such sales would push up longer-term interest rates, including mortgage rates, and be counterproductive to Warsh.

Trump considered appointing Warsh as Fed chairman during his first term, although he ultimately went with Powell. Wershe’s father-in-law is Ronald Lauder, heir to the Estée Lauder cosmetics fortune and a longtime donor and Trump confidant.

Warsh in recent years has become highly critical of the Fed, calling for “regime change” and attacking Powell for his engagement on issues such as climate change and diversity, equity and inclusion, which Warsh has said are outside the scope of the Fed’s mandate.

His more critical approach suggests that if he ascends to chair, it would mark a sharp turnaround at the Fed.

In a July interview on CNBC, Warsh said Fed policy “has been violated for too long.”

He added, “The central bank that is there today is radically different from the central bank that I joined in 2006.” By allowing inflation to rise in 2021-2022, the Fed made “the biggest macroeconomic policy mistake in 45 years, one that has divided the country.”