BREAKING: Trump nominates inflation hawk Kevin Warsh to replace Jerome Powell as Fed chair

Washington (CNN) — President Donald Trump said Friday he is nominating Kevin Warsh to be the 17th chair of the Federal Reserve after Jerome Powell’s term ends in May.

“I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Trump wrote on his social media platform on Friday morning. “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.”

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.

“It’s reasonable to assume that he told the President he favors reducing interest rates today, otherwise he would not have been nominated,” wrote Samuel Tombs, chief US economist at Pantheon Macroeconomics, in commentary issued Friday. “Our instincts tell us Mr. Warsh will be more preoccupied with how history will view his record than with continuing to pander to the President.”

Selecting a new Fed chair is one of the most important hires any president makes – but the nomination takes on even greater importance under this president. Trump has vowed to drive down the cost of living, and the Fed is responsible for maintaining price stability.

Trump has railed against the Fed and Powell for the past year, berating Powell, his handpicked Fed chair, for not cutting rates. Earlier this month, Powell revealed in an extraordinary video statement that the Trump administration has launched a criminal investigation into the Fed and its chair. In his extraordinary rebuke, Powell said the move was a “pretext” to intimidate the central bank to lower rates to the president’s liking.

It’s been no secret that Trump has been unhappy with Powell, though it’s not clear he has the authority to actually fire him. However, Trump waved a termination letter in front of a group of House Republicans at an Oval Office meeting in August, according to three people familiar with the matter.

Meanwhile, the Trump administration is actively arguing before the Supreme Court why it should proceed with removing Fed Governor Lisa Cook, whom the president said he fired in August. The Fed’s independence is at stake in the landmark case, but conservative Justices were already skeptical about the administration’s legal reasoning in oral arguments earlier this month.

The long journey to pick a Fed chair

Trump’s choice for central bank head caps off an extensive search process that at one point considered about a dozen people, from MAGA fixtures such as National Economic Council Director Kevin Hassett to even former Treasury Secretary Janet Yellen, according to Scott Bessent, Trump’s Treasury chief, who led the search. Bessent himself was also under consideration for the role but told Trump he’d prefer to remain in his current position.

In addition to Warsh, the final four candidates were National Economic Council Director Kevin Hassett, Fed Governor Christopher Waller and BlackRock’s Rick Rieder.

“Christopher Waller, Rick Rieder, and others, were interviewed for the Fed position. They all would have been outstanding, and have a great and unlimited future with “TRUMP.” Such amazing talent in our Country. Thank you!” Trump wrote on Truth Social on Friday.

Hassett would have been “a great Chairman,” Trump noted in a separate post. “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. Kevin is indescribably good so, as the expression goes, ‘if you can’t do better, don’t try to fix it!’”

The Senate Banking Committee will consider Warsh’s nomination through a public hearing, then the broader Senate chamber will vote on whether or not to confirm him. But even that process may be tainted by the Trump administration’s extraordinary criminal investigation of Powell, a red line that some key Republican senators said Trump crossed that could hold up Warsh’s nomination until the investigation draws to a close.

“No Republican purporting to care about Fed independence should agree to move forward with this nomination until Trump drops his witch hunts of the current Chairman of the Federal Reserve and Governor Lisa Cook,” Sen. Elizabeth Warren of Massachusetts, a Democratic member of the committee, said in a statement Friday.

Trump’s efforts to politicize the Fed’s decisions have threatened to undermine the central bank’s prized independence. Members of the Senate Banking Committee will almost certainly ask Warsh about his shifting policy on interest rates and any potential promises he made to Trump about setting policy.

He may also get questions about his father-in-law, Republican mega-donor Ronald Lauder. In 2002, Warsh married cosmetics billionaire heiress and businesswoman Jane Lauder, granddaughter of Estée Lauder. They met at Stanford.

Warsh’s bona fides

Warsh worked as a White House economist in the George W. Bush administration. He is currently a visiting fellow at the Hoover Institution, a conservative-leaning think tank at Stanford University.

Although Trump is seeking deep interest rate cuts to turbo-charge US growth, some economists and analysts note that Warsh once had a track record of pushing back against policies that stimulate the economy.

For instance, in April 2009 during the middle of the Great Recession when the unemployment rate was surging, Warsh expressed concern about inflation.

“I continue to be more worried about upside risks to inflation than downside risks,” Warsh said during a Fed meeting, according to minutes that were later released. His own reason for resigning from the Fed in 2011 also underscores his aversion to loose monetary policy — at least before he was in the running for Fed chair this time around.

“Kevin Warsh has been a monetary policy hawk his entire career and most importantly, during a time when the labor markets fell out of bed. His dovishness today stems from convenience,” analysts at Renaissance Macro Research posted on X Friday. “The President risks getting duped.”

Warsh is seen in economic and financial circles as an experienced and serious policy figure with a deep resume. As a young Fed governor, he played a key role managing the financial crisis alongside then-Fed Chair Ben Bernanke and former New York Fed President Timothy Geithner, who later became Treasury secretary.

However, he has shown he can be independent in the past: He stepped away from the central bank due to policy disagreements about the crisis-management tools the Fed used after the Great Financial Crisis. He was critical of quantitative easing, or large purchases of Treasury bonds to help lower long-term interest rates, saying later that such moves risked pushing up inflation and brought the Fed outside its core mandate.

“He got the policy response wrong in the aftermath of the Great Financial Crisis,” Joe Brusuelas told CNN on Thursday. “He truly did not understand the nature, magnitude and implications of the Depression-like shock that occurred.”

“During the defining crisis of our time – the Great Financial Crisis – Kevin Warsh continued to extoll inflation as the primary risk during 2007-08 as a massively deflationary event was unleashed via the near collapse of the American banking sector and freezing up of credit markets that ensued.”