Trump selects Warsh to lead Federal Reserve

Donald Trump has chosen former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as chair of the US central bank when Powell’s term concludes in May, signalling a sharp shift in tone at the Fed and reviving a long-running debate over the institution’s independence and policy direction.

The selection places a frequent critic of the Fed’s crisis-era interventions at the helm of the world’s most influential monetary authority. Warsh, who served as a Fed governor from 2006 to 2011, is known for scepticism about prolonged quantitative easing and for arguing that the central bank has stretched its mandate by leaning too heavily into financial markets. The White House said the appointment aims to restore what it described as “discipline and credibility” to monetary policy as inflation risks, fiscal pressures and geopolitical uncertainty continue to shape the outlook.

Powell’s term as chair ends in May, bringing to a close a period marked by aggressive rate rises to curb inflation followed by a prolonged effort to balance price stability with economic growth. Under Powell, the Fed emphasised institutional independence and data-driven decision-making, often resisting political pressure for faster or slower moves. Trump, by contrast, has repeatedly argued that interest rates were kept too high for too long and that tighter policy constrained growth and investment.

Warsh’s return would mark one of the most consequential central-bank leadership changes in more than a decade. During his earlier tenure, he played a role in navigating the global financial crisis, supporting emergency liquidity measures while later voicing concern that extraordinary tools risked becoming permanent fixtures. Since leaving the Fed, he has been a prominent commentator on monetary policy, warning that expansive balance sheets and blurred lines between fiscal and monetary roles could undermine confidence in the dollar.

Market reaction to the announcement was measured, reflecting expectations that any chair operates within a committee-driven framework. Analysts noted that while the chair sets the agenda and tone, policy outcomes depend on the Federal Open Market Committee, which includes regional bank presidents and governors appointed across administrations. Even so, leadership matters for communication strategy, regulatory priorities and the willingness to challenge prevailing consensus.

Supporters of the pick argue Warsh brings intellectual clarity and crisis experience at a time when the Fed faces difficult trade-offs. Inflation has eased from its earlier peaks but remains sensitive to energy prices, supply chains and labour costs. Meanwhile, high public debt levels and large Treasury issuance have increased scrutiny of the interaction between monetary policy and government borrowing. Warsh has contended that the Fed should focus narrowly on price stability and financial soundness, leaving broader economic objectives to elected officials.

Critics counter that his past statements suggest a predisposition toward tighter policy that could risk choking off growth or destabilising markets. Some economists have also questioned whether his views adequately account for structural changes in the economy, including shifts in labour participation, technology-driven productivity and the global role of the dollar. Others point to his vocal criticism of the Fed while outside government as evidence of a more confrontational leadership style.

The nomination process is expected to draw close attention on Capitol Hill. The Senate confirmation hearings will likely probe Warsh’s stance on inflation targeting, bank regulation, climate-related financial risks and the Fed’s supervisory role. Lawmakers are also expected to question how he would safeguard the institution’s independence amid heightened political scrutiny.

Warsh’s professional background extends beyond central banking. He has advised corporate boards, engaged with international financial institutions and participated in policy forums focused on global capital flows. That breadth, allies say, equips him to navigate a complex landscape in which monetary decisions reverberate across currencies, commodities and emerging markets.

For the Fed’s staff and regional banks, the transition would come at a delicate moment. The central bank is in the midst of reviewing its long-term policy framework, including lessons from the inflation surge earlier in the decade. Any recalibration under new leadership would need to preserve continuity while addressing criticisms about communication and forecasting.