Trump is satisfied with Powell's successor: No need for White House pressure, Walsh will cut interest rates on his own.

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U.S. President Trump appears very satisfied with his chosen "Powell successor," believing that former Fed Governor Kevin Warsh would cut rates on his own without needing pressure from him.

According to reports during U.S. stock market trading on Friday, January 30, Trump said in the White House office that Warsh would lower interest rates without the White House’s urging. Trump stated that Warsh did not promise him a rate cut, but that he “certainly wants to” cut rates. When asked whether he had discussed this with Warsh, Trump said he wanted to “keep things nice and pure.”

Before the U.S. stock market opened on Friday, Trump announced on social media that he would nominate Warsh as Fed Chair, succeeding current Chair Powell, whose term ends in May 2026. Trump claimed he had known Warsh for a long time and had no doubt he would rank among the great Fed Chairs, possibly even the best. Trump also said that Warsh's image and temperament fully matched public expectations for the position.

Warsh was already one of the nominees for Fed Chair during Trump's first term in 2017. Last year, he changed his long-held hawkish stance and openly supported rate cuts, and finally, at the age of 55, obtained this most influential position in global finance.

Nick Timiraos, a senior Fed reporter known as the “new Fed newsletter,” believes that Warsh replacing Powell would be the biggest transfer of Fed power since Volcker took charge in 1979. Back then, Volcker significantly changed the Fed's approach to inflation, and since Greenspan succeeded Volcker in 1987, every Fed Chair has emphasized continuity with their predecessor. Warsh, however, promises to break from this tradition—completely rethinking the Fed’s asset holdings, policy framework, economic role, and relationship with the executive branch.

After news of Warsh's nomination broke, the dollar surged, U.S. Treasury prices were mixed, and the yield curve steepened, with shorter yields falling and longer yields rising. Wall Street investors and strategists say that Trump’s choice of Kevin Warsh to lead the Fed is a relatively hawkish pick; he may resist expansion of the balance sheet, which would support the dollar and steepen the yield curve.

Stance Shift Becomes Chairmanship "Pass"

Warsh’s change of stance is seen as a key factor in gaining Trump’s nomination. This economist served as Fed Governor from 2006 to 2011 and consistently remained vigilant about inflation during his tenure, often supporting higher interest rates. In 2021, he foresaw and warned that the Fed’s continued large-scale purchases of Treasuries and mortgage-backed securities would sow the seeds for greater inflation risk. He even called for rate hikes at the most severe points of the financial crisis.

But in 2025, Warsh changed his tune and echoed Trump’s views that rates could be cut sharply. “This requires breaking a few old conventions, because their way of doing things doesn’t work anymore,” Warsh told Fox News last July. He proposed a rate-cut plan, believing that by more aggressively shrinking the Fed’s $6.6 trillion balance sheet, the central bank could lower rates further.

This openness to rate cuts is regarded as a litmus test for becoming the next Fed Chair. Trump made it clear in a social media post last December: "Anyone who disagrees with me will never be Fed Chair!" Trump nominated Powell as Fed Chair during his first term, but since Powell took office the two have often differed. In 2020, Trump lamented that he regretted choosing Powell over Warsh.

Ironically, in 2010 when Warsh was still a Fed Governor, he delivered a speech titled "Ode to Independence," which specifically discussed the Fed's independence. He told an audience of monetary policy experts at the time: "Any attempt to improperly influence the Fed’s policy will meet with strong resistance from Fed officials and market participants."

The New Chair Faces Multiple Challenges

Timiraos believes that, should the nomination be confirmed smoothly, Warsh would have to balance two forces: a president who expects the Fed to follow his policy wishes, and Fed colleagues who have long endured his sharp criticism. Although the Fed Chair has significant influence, they do not have unilateral decision-making power. Rate decisions are made by votes among the 12-member FOMC, meaning that even with Warsh as Chair, policy direction is not guaranteed a fundamental shift.

Timiraos noted that several people who have spoken with Warsh were shocked by his harsh criticism of Fed leadership. Former Dallas Fed President Richard Fisher pointed out that Warsh’s public criticism of Fed leaders in the past may make it hard for him to gain trust from new colleagues.

Fisher said: "Kevin will have to make a huge effort to resolve the sentiment inside the Fed—he almost immediately turned to attacking the Fed after he left."

Former Fed Vice Chair Donald Kohn, who worked closely with Warsh, praised him as "very smart—both intellectually and in reading situations," but added that he disagreed with many of Warsh's criticisms, "especially the caustic tone with which they were delivered."

The challenges facing Warsh are almost without modern precedent: assessing the impact of Trump’s efforts to reshape global trade, judging the profound changes artificial intelligence (AI) could bring to productivity and labor markets, and dealing with the possible impact of the rise of digital assets on banking regulation.

In recent TV interviews and public appearances, Warsh has deliberately avoided giving specific answers on these trade-offs, instead frequently referencing former Fed Chair Greenspan’s experience—Greenspan chose to delay rate hikes during moderate inflation amid steady economic expansion in the mid-1990s.

On the policy agenda, Warsh has made it clear that reforming the Fed’s massive $6.6 trillion balance sheet will be a core goal. He believes the Fed’s asset size is too large and should establish a new coordination mechanism with the Treasury to reduce direct influence on money markets.

Senate Confirmation Remains Uncertain

Warsh’s Senate confirmation may be complicated by a recent Justice Department investigation into the Fed. On January 9, the Fed received a subpoena concerning Powell’s 2025 congressional testimony about the Fed's headquarters renovation project. Powell issued a rare video statement condemning the investigation, and several Republican senators also defended the Fed.

Several key senators, including Republican Thom Tillis on the Senate Banking Committee, warned that after the Justice Department issued a subpoena to the Fed over Powell’s statements regarding the renovation project, Trump’s Fed nominees would face stricter scrutiny.

Tillis said on social media Friday that Warsh is "a qualified nominee with deep understanding of monetary policy," but said he would oppose the nomination until the Fed investigation is resolved.

On the Senate Banking Committee, which handles Fed nominations, Republicans hold 13 seats, just a slim majority over the Democrats' 11. If all Democratic members oppose the nomination, Tillis’s opposition could prevent Warsh from being approved. GOP leaders may then try to bypass the committee and bring the matter directly to a full Senate vote.

The Fed announced after this Wednesday’s meeting that it would keep policy rates unchanged, pausing after three straight rate cuts through December. The current target range for the federal funds rate is 3.5% to 3.75%. Futures market pricing shows investors expect rates to fall to about 3% by the end of 2026, but this is still significantly higher than Trump’s publicly stated hopes. In a December interview, Trump said he thought rates should be at 1% or lower.

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