President Donald Trump named his nominee for Federal Reserve chairman on Friday morning, and it’s the odds-on favorite Kevin Warsh.
Warsh was among the frontrunners to replace current chairman Jerome Powell for many months, particularly after Trump said he’d been impressed by the “two Kevins” (Warsh and Kevin Hassett, director of the United States National Economic Council) during the interview process. Trump confirmed Warsh’s nomination to lead the central bank on Truth Social on Friday, writing that he had “known Kevin for a long period of time, and [had] no doubt that he will go down as one of the GREAT Fed Chairmen [sic], maybe the best.”
Warsh has the credentials the market likes to see atop the central bank: He knows the inner workings of the central bank courtesy of a stint on the Board of Governors from 2006 until 2011, and he was a key player in the inner circle of then-Chairman Ben Bernanke as the nation navigated a financial crisis.
He knows Washington, having been brought into the fold by President George Bush in 2002, when he served as special assistant to the president for economic policy and as executive secretary at the National Economic Council.
He’s also got the private sector experience 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 Stanley, his final role being vice president and executive director.
But what’s known of Warsh outside of his CV?
His plans for the Fed echo the rhetoric Bessent has been pushing for a while (the duo occupied in the same Wall Street circle for years): The Fed should be taking a more back-seat approach. Investors may not like this early on; they’ve grown used to poring over the many updates on the Fed’s thinking courtesy of 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 footsteps when it comes to leadership. While Powell receives praise for his ability to herd the many cats of the Federal Open Market Committee (FOMC) toward a consensus, the Harvard and Stanford alumni may instead establish strategies with a smaller group of allies, before expanding his thinking to the wider group.
As to Warsh’s current inner circle, in 2002 he married Jane Lauder, granddaughter of Estée Lauder and an heiress to the beauty empire. Perhaps unusually for the Washington elite, they invest both time and money in improving pet longevity—inspired by their cockapoo named Thaddeus. In November, Lauder’s (named as one of Fortune’s Most Powerful Women) investment firm, TAW Ventures, led a funding round for the British fresh dog food brand Marleybones.
Big picture approach
With Warsh at the podium following future FOMC meetings, the narrative is set to change. Trump has made it clear his nominee will be dovish, meaning the incoming chairman will likely have a more upbeat outlook.
Warsh has been critical of Powell’s wait-and-see approach, writing in a WSJ op-ed late last year that the Fed should “discard its forecast of stagflation in the next couple of years, as if subpar growth and inflation 40% above target is the best that can be done.” The Fed nominee is bullish on the U.S. in a similar way to JPMorgan CEO Jamie Dimon (who, incidentally, has backed Warsh), believing the nation will continue to post strong growth courtesy of its entrepreneurial spirit—AI being a key example.
Economists have also suggested that the Fed has become too bogged down in the short-term, moving interest rate expectations on a daily basis when, in fact, the often-forgotten third aspect of the Fed’s mandate is to “moderate long-term interest rates.” Warsh’s press conferences may instead focus on broader macroeconomic topics or headwinds, rather than leaving analysts to speculate about the meaning of minor changes in speech language.
Traditional communication approach
Warsh isn’t flashy; he enjoys fuss-free fine dining while reading the newspaper and is often found on the sidelines of economic conferences rather than on stage. Other candidates had secured a plethora of media interviews, but Warsh held back.
Indeed, the key question about Warsh’s candidacy is whether he can convince markets of his political independence and, by extension, the central bank’s autonomy. Trump’s ongoing pressure campaign has led many to fear he’ll appoint a Yes Man, who’ll sail through the Republican-controlled Senate confirmation process, and push rates down to unhealthy levels to appease the president, damaging the economy as a result. (Fed watchers have already had a taste of how a Trump 2.0 appointee might behave at the FOMC, following last year’s confirmation of White House economic advisor Stephen Miran, who has pushed for base rate cuts as a Fed governor ever since).
Powell’s advice to his successor is to avoid politics as much as possible, and Warsh has made it clear he wants the Fed to rein in its public exposure (something sources told Fortune they’ll be only too happy to oblige).
“Fed leaders would be well served to skip opportunities to share their latest musings,” Warsh said early last year, adding that members were becoming “prisoners of their own words.” It’s a signal that the Fed may return to its “never apologize, never explain” roots, perhaps uncomfortable for markets in the short term, but potentially deescalating tensions with the White House in the longer view.
