President Donald Trump said he intends to nominate former Federal Reserve Governor Kevin Warsh to succeed Jerome Powell as chair of the Fed. Markets reacted quickly, with Treasury yields and the US dollar moving higher on the news.
Markets react fast
Bond yields climbed following the announcement, particularly on the long end of the curve. The dollar also strengthened, while gold and silver pulled back sharply. The moves suggest investors are reassessing the future path of interest rates and the Fed’s balance sheet under potential new leadership.
Even so, futures markets tied to Fed policy showed only modest changes in expectations for rate cuts over the next couple of years, indicating traders are not yet pricing in a dramatic policy shift.
Who is Kevin Warsh?
Warsh served on the Federal Reserve Board of Governors from 2006 to 2011. In recent years, he has argued for a smaller Fed balance sheet and has expressed support for lower interest rates in certain contexts positions that align with Trump’s long-running calls for easier monetary policy.
His nomination could face political hurdles in the Senate, but if confirmed, he would take over when Powell’s term as chair ends.
Policy direction under scrutiny
Investors are now debating what a Warsh-led Fed might mean. Some see a tilt toward faster rate cuts or a quicker reduction in the Fed’s massive bond holdings. Others question whether he could win broad support within the Fed for a major policy pivot.
For now, the key takeaway is uncertainty: leadership changes at the Federal Reserve can shift expectations, but actual policy still depends on incoming economic data and consensus within the central bank.