Since Friday (30), experts on Federal Reserve matters and market analysts have been poring over the CV of Kevin Warsh, the new nominee of the President of the United States, Donald Trump, for the presidency of the North American central bank, trying to decipher between the lines to determine what type of Fed chair he will be, if approved by the Senate.
Trump himself explicitly stated that whoever he chose would have to follow his orders. “Anyone who disagrees with me will never be chairman of the Fed!” he posted on social media in December.
The Fed leadership appointment is, without a doubt, the most important of a president’s entire term. Warsh would be one of 12 votes on the Federal Open Market Committee (FOMC) and cannot act unilaterally.
Following Trump’s vision, anyone running for office is preparing themselves for a very difficult task: convincing the market that they are independent, at the same time that they need to comply with the president’s wishes.
The US president has complained for years that he should have more direct influence over the Fed and announced Warsh as his choice to replace Jerome Powell, whose term at the head of the Fed ends in May.
a Harvard Law graduate, with experience at Morgan Stanley and the youngest person to be appointed to the Fed Board of Governors.
On Friday (30) there was moderate relief. Some of that relief, however, has since been tempered, as observers have focused on Warsh’s interpretation of the post-2008 economic recovery, his track record as one (preferring higher interest rates), as well as his sudden change of stance on inflation risks when Trump was re-elected.
On Monday, any lingering concerns about Warsh were largely put aside as Wall Street turned its attention to U.S. manufacturing data.
In short, Trump wants lower interest rates to boost economic growth.
Trump has repeatedly threatened to fire Powell. He tried to fire Lisa Cook, a Fed governor appointed by President Joe Biden, on charges of mortgage fraud. Cook, who has not been accused of any crime, denies the allegations, and the Supreme Court is expected to rule soon on the legality of her dismissal. And, more recently, the Department of Justice last month launched a criminal investigation against the Fed and Powell, citing budget overruns at the central bank’s headquarters (an escalation of Trump’s attacks that even provoked a public rebuke from Powell).
With this context on the radar, it can be said that Kevin Warsh will have to deal, in a certain way, with a complex situation, Donald Trump’s nomination.
