President Trump has nominated Kevin M. Warsh to succeed Federal Reserve Chairman Jerome Powell when his term ends in May.
The president announced this via a post on Truth Social on Friday morning.
Warsh would also need to be confirmed by the Senate to serve as head of the central bank.
“I have known Kevin for a long time and I have no doubt that he will go down in history as one of the GREAT Fed Chairs, perhaps the best,” President Trump wrote. “Plus, he’s central casting, and he’ll never let you down. Congratulations Kevin!”
Other contenders for the Fed chairmanship that the Trump administration had considered included Kevin A. Hassett, an economic adviser to Trump, Christopher J. Waller, a current Fed governor, and Rick Rieder, a director at BlackRock.
In his announcement, Trump made no mention of Powell, who is currently facing a Justice Department investigation that the Fed chairman described as politically motivated.
Since taking office, the president has scrutinized Powell and threatened to fire him if he did not cut rates further and faster, as Americans grapple with the fallout from inflation and a weak labor market.
The pressure campaign has raised questions about whether or not the central bank can remain an independent institution in the future. In response to the criminal investigation into Powell, some Senate Republicans responded strongly in support of the Fed chairman and also vowed to block any new nominee until the investigation is resolved.
Trump has made no secret of the fact that his main criteria for the new Fed chairman was someone who would support a significant rate cut.
During Wednesday’s meeting, the Fed voted to keep interest rates stable within a range of 3.5 to 3.75 percent.
Warsh, a conservative economist, previously worked as an aide to President George W. Bush and served as governor on the Fed board from February 2006 to March 2011. During that period, he also served as the Fed’s representative to the Group of 20, and played a key role in the Fed’s response to the 2008 financial crisis – including helping to sell Bear Stearns to JPMorgan Chase. Before joining the Fed, Warsh worked in mergers and acquisitions at Morgan Stanley.
More recently, he has worked with billionaire investor Stanley Druckenmiller and is a senior fellow at Stanford University’s Hoover Institution.
During his first term at the Fed, Warsh became known as a “hawk” when it came to curbing inflation through higher interest rates.
Since becoming a candidate for Fed chairman, however, Warsh’s views on interest rates and inflation have taken a turn and he has publicly voiced his criticism of the central bank.
In an appearance on CNBC in July, Warsh said: “Their hesitation to cut rates is, I think, actually… quite a sign against them.” Warsh also called for a “regime change in policy,” adding, “The credibility deficit, in my opinion, lies with the incumbents at the Fed.”
Economists have long viewed the Fed’s independence as crucial to the stability of financial markets and the economy. The question of whether or not Warsh can maintain the institution’s independence will be on the minds of many during his confirmation hearing. In the past he has called Fed independence “essential,” but more recently he has also suggested that full independence may not be ideal.
“History teaches us that independent operations in the conduct of monetary policy are essential,” he told CNBC in July. “But that doesn’t mean the Fed is independent in everything else it does.”
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