Donald Trump preparing to nominate Kevin Warsh as Federal Reserve chair

Donald Trump is preparing to nominate former Federal Reserve governor Kevin Warsh to replace Jay Powell as chair of the world’s most important central bank, according to three people familiar with the matter.

The US president said at a Kennedy Center event in Washington on Thursday evening that he would announce his candidate to lead the Fed “tomorrow morning”.

“A lot of people think that this is somebody that could have been there a few years ago,” the president said. “It’s going to be somebody that is very respected, somebody that’s known to everybody in the financial world.”

Warsh interviewed for the job in 2017. It eventually went to Powell, whose term as chair expires in May.

Stephen Brown, deputy chief North America economist at Capital Economics, said that Warsh was “a relatively safe choice”. 

He added: “Warsh’s long-running hawkish views should help to counteract concerns that he might morph into a full-blown Trump stooge.”

The White House did not respond to a request for comment. The president’s apparent preferences for Fed chair have swung back and forth in recent weeks and could yet change before a formal announcement.

Precious metals tumbled and the dollar strengthened as markets reacted to the expected choice. “Warsh is a more orthodox pick for Fed chair by President Trump and knee-jerk market reactions appear to reflect this,” said Bill Campbell, portfolio manager at DoubleLine.

Gold prices fell more than 5 per cent to around $5,100 a troy ounce while the dollar rose 0.4 per cent against a basket of its key trading partners. Silver fell 13 per cent to $100.42 per ounce.

Futures tracking the S&P 500 and Nasdaq 100 fell 0.8 per cent and 0.9 per cent, respectively. In Europe, the Stoxx 600 was 0.4 per cent higher.

Treasury yields rose slightly while prices for bitcoin slipped 2 per cent to $82,713 a token.

Warsh — who was the youngest Fed governor ever when he joined the central bank in 2006 — is known for his connections on Wall Street and in Washington policymaking circles.

While he has a long-standing relationship with the president, some viewed his hawkish stance during his time at the Fed as a big obstacle to winning Trump’s trust.

Warsh, who has advocated for “regime change” at the central bank, has said the Fed should reduce the size of its vast balance sheet — something Treasury secretary Scott Bessent also supports.

His nomination as Fed chair would represent a more conventional pick after months of deliberations at the White House. He is a figure familiar in traditional Republican economic and financial circles predating Trump’s rise to power.

Warsh’s odds on prediction market Polymarket surged to 95 per cent on Thursday evening after Trump’s remarks. Odds on Rick Rieder, the BlackRock executive who was widely seen as Warsh’s chief rival to secure Trump’s nomination, fell to 3 per cent.

Fed governor Christopher Waller and White House economist Kevin Hassett are also in the running.

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Trump’s decision would end one of the most contentious races for the top Fed job in recent memory. It comes at a time when he has relentlessly criticised Powell for not bowing to his demands to cut interest rates, with the president referring to him on Thursday as a “moron” who was hurting the US’s economic prospects.

The Fed held borrowing costs at a range of 3.5 per cent to 3.75 per cent on Wednesday, following three quarter-point cuts last year.

Trump posted on Truth Social that Powell had “absolutely no reason” to keep interest rates high.

“We should have a substantially lower rate now that even this moron admits inflation is no longer a problem or threat,” the president said. “He is costing America Hundreds of Billions of Dollar a year in totally unnecessary and uncalled for INTEREST EXPENSE.”

Trump, who wants borrowing costs to fall to about 1 per cent, has said any candidate who gets the job must be willing to slash rates.

Trump, who has on several occasions claimed an announcement was imminent, earlier on Thursday had said he expected to name his pick next week.

The president’s repeated attacks on the Fed have raised alarm in financial markets about the independence of the central bank.

The odds for Hassett, a close ally of the president, collapsed amid anger in the Senate over the White House’s launch of a criminal investigation into Powell’s testimony to Congress about a renovation of the Fed’s headquarters that is $700mn over budget.

Powell said the Department of Justice’s decision to serve him with grand jury subpoenas was “a pretext” aimed at pressing the central bank into making more rate cuts. The Fed has defended his testimony.

Some Republican senators, led by North Carolina’s Thom Tillis, threatened to block Trump’s pick — who needs to be confirmed by a Senate majority — unless the probe was dropped.

Vincent Mortier, chief investment officer of Amundi, said Warsh had a “pretty traditional profile”, which “would likely ease concerns about Fed independence”.

“This could be positive for the US dollar — no negative shock,” he added.

But Mortier cautioned that Warsh’s appointment could be “less favourable” for short-term interest rate expectations and could have a slightly negative impact on US equity markets.

Additional reporting by Emily Herbert in London and William Sandlund in Hong Kong