Overview of Who Is the New Fed Chair?
This episode of The Journal (The Wall Street Journal & Spotify Studios) explains President Trump’s announcement that Kevin Warsh will be the next Federal Reserve chair, why Warsh was chosen, his background and views, the political hurdles he faces, and what his appointment might mean for U.S. monetary policy and Fed independence.
Kevin Warsh — background and career
- Age and education: 55; Stanford (undergrad), Harvard Law.
- Early career: Morgan Stanley banker; joined Bush White House as an economic aide.
- Fed experience: Appointed Fed governor in 2006 at age 35 (one of the youngest ever), served through the 2008 financial crisis.
- Post-Fed profile: Left in 2011 and became a visible critic of the Fed’s “easy money” policies—regular op-eds, essays, interviews arguing QE and low rates risk inflation and asset bubbles.
- Personal connections: Married into the Lauder family; family ties noted in reporting and political context.
Warsh’s views and likely policy stance
- Critique of Fed orthodoxy: Questions mainstream macro models (e.g., Phillips-curve style link between tight labor markets and inflation) and criticizes groupthink among PhD economists.
- Regime-change rhetoric: Publicly called for major changes in how the Fed sets policy, communicates, and supervises banks—advocates more debate and different analytical frameworks.
- Interest rates: Has publicly pushed for rate cuts recently and suggested the Fed has made forecasting and policy mistakes over the past several years.
- Mixed record on independence: In 2010 he defended Fed independence; more recently, he’s downplayed concerns about presidential pressure. This creates uncertainty about which posture he’ll adopt as chair.
Political and confirmation hurdles
- Senate confirmation: Republicans control the Senate, making confirmation likely—but not certain.
- DOJ probe and political friction: Current chair Jerome Powell is under a DOJ probe related to Fed building renovations; some senators (notably Sen. Tom Tillis) have pledged to block Fed confirmations until investigations are resolved. This could delay or complicate Warsh’s confirmation.
- Trump’s expectations: The White House selection reportedly prioritized a chair receptive to low-rate policy; Trump publicly praised Warsh and noted his “central casting” appearance.
What Warsh would inherit — key economic challenges
- Inflation: The Fed has spent years above its 2% goal; credibility questions remain about meeting that target.
- Labor market shifts: Job growth has slowed; role of immigration and structural changes (including AI) complicates labor dynamics and policy response.
- Balance sheet and supervision: Questions about Fed asset holdings, regulatory approach, and internal staff/structure if Warsh pursues “regime change.”
Likely timeline and limits to immediate change
- Institutional constraints: The Fed is run collectively (rate votes by FOMC); the chair cannot unilaterally transform policy. Changes will require consensus-building and take time.
- Early signals to watch: Senate hearings, Warsh’s floor testimony, first moves on communications, FOMC rhetoric, any personnel changes, and near-term decisions about the balance sheet or supervisory posture.
Notable quotes from the episode
- Trump on Warsh: “I have no doubt he'll go down as one of the great Fed chairmen… On top of everything else, he is central casting.”
- Warsh (themes paraphrased): The Fed needs “robust discussion of ideas” and less “groupthink”; mainstream models mis-characterize how inflation emerges.
Key takeaways
- Warsh combines Fed institutional experience with a recent public critique of Fed policy—creating uncertainty about whether he will act as a traditional independent central banker or drive a more Trump-aligned, rate-cutting agenda.
- Confirmation is probable but could be delayed or complicated by political investigations and senators’ objections.
- Expect policy and organizational change to be gradual; the Fed’s structure and collegial decision-making will slow abrupt shifts, but Warsh’s appointment sets the stage for a multi-year potential reorientation of monetary policy, communication, and supervision.
What to watch next
- Senate confirmation hearings and any delay tied to DOJ probes.
- Warsh’s testimony and specific policy prescriptions (timing/scale of rate cuts, views on the Fed’s balance sheet and models).
- FOMC member reactions and any early staffing or leadership changes at the Fed.
- Market response to appointment and any changes in Fed communications or asset-management strategy.