Former President Trump seems very satisfied with his chosen &#34;successor to Powell,&#34; believing that former Federal Reserve Governor Kevin Warsh will lower interest rates on his own without pressure from him.
According to reports during the midday trading session of U.S. stocks on January 30, Trump stated in the Oval Office that Warsh would lower rates without White House pressure. Trump mentioned that Warsh had not committed to him to lower rates, but he &#34;certainly wants to lower rates.&#34; When asked if he had discussed this matter with Warsh, Trump said he wanted to &#34;keep things nice and pure.&#34;
On Friday morning before the U.S. stock market opened, Trump announced on social media that he would nominate Warsh as the chairman of the Federal Reserve, succeeding the current chairman Powell, whose term ends in May 2026. Trump claimed to have known Warsh for a long time and had no doubt that he would rank among the great Federal Reserve chairmen, possibly being the best one. Trump also stated that Warsh's image and temperament perfectly matched the public expectations for the position of Federal Reserve chairman.
Warsh was one of the nominees for Federal Reserve chairman during Trump's first term in 2017. Last year, he changed his long-held hawkish stance and publicly supported interest rate cuts, finally obtaining this globally influential position in the financial world at the age of 55.
Nick Timiraos, a senior reporter known as the &#34;new Federal Reserve correspondent,&#34; believes that Warsh's succession of Powell could be the most significant power transfer at the Federal Reserve since Volcker took over in 1979. Volcker made significant adjustments to the Federal Reserve's strategy for dealing with inflation, while every Federal Reserve chairman since Greenspan took over from Volcker in 1987 has emphasized continuity with their predecessors. Warsh has promised to break this tradition by completely rethinking the Federal Reserve's asset holdings, policy framework, economic role, and relationship with the executive branch.
After the news of Warsh's nomination broke, the dollar rebounded sharply, U.S. Treasury prices fluctuated, and the yield curve steepened, with short-term yields declining and long-term yields rising. Wall Street investors and strategists indicated that Trump's choice of Kevin Warsh to lead the Federal Reserve is a relatively hawkish choice, and he may resist the expansion of the balance sheet, which would support the dollar and make the U.S. Treasury yield curve steeper.
<h2>Shift in Stance as a &#34;Pass&#34; to Chairmanship</h2>
Warsh's shift in stance is seen as a key factor in his nomination by Trump. The economist served as a Federal Reserve governor from 2006 to 2011, during which he remained vigilant about inflation and often supported higher interest rates. In 2021, he presciently warned that the Federal Reserve's continued large-scale purchases of Treasury and mortgage-backed securities would sow greater inflation risks. He even called for interest rate hikes during the most severe periods of the financial crisis.
However, in 2025, Warsh changed his tune, echoing Trump's view that interest rates could be significantly lowered. &#34;This requires breaking some old conventions because their way of doing things is no longer working,&#34; Warsh said in July last year to Fox News. He proposed a plan for interest rate cuts, believing that by more aggressively reducing the Federal Reserve's $6.6 trillion balance sheet, the central bank could also lower rates more
This open attitude towards interest rate cuts is seen as a litmus test for the next chairman. Trump explicitly stated in a social media post last December: &#34;Anyone who disagrees with me will never be the chairman of the Federal Reserve!&#34; Trump nominated Powell as the chairman of the Federal Reserve during his first term, but there have been disagreements between the two since Powell took office. In 2020, Trump lamented that he regretted choosing Powell over Warsh.
Ironically, in 2010, when Warsh served as a Federal Reserve governor, he delivered a speech titled &#34;Ode to Independence,&#34; specifically discussing the independence of the Federal Reserve. He told the audience of monetary policy experts at the time: &#34;Any attempt to improperly influence Federal Reserve policy will be met with strong resistance from Federal Reserve officials and market participants.&#34;
<h2>New Chairman Faces Multiple Challenges</h2>
Timiraos believes that if Warsh's nomination is confirmed smoothly and he takes office, he must find a balance between two forces: on one side is a president who expects the Federal Reserve to comply with his policy wishes, and on the other side are his colleagues at the Federal Reserve who have endured his sharp criticisms for years. Although the chairman of the Federal Reserve has significant influence, he does not have unilateral decision-making power. Interest rate decisions are made by a vote of the 12 members of the Federal Open Market Committee (FOMC), which means that even if Warsh becomes chairman, there is no guarantee that the policy direction will fundamentally change.
Timiraos mentioned that several people who have spoken with Warsh were surprised by his harsh attitude towards the Federal Reserve leadership. Former Dallas Fed President Richard Fisher pointed out that Warsh's past public criticisms of the Federal Reserve leadership may put him to the test of trust among his new colleagues.
Fisher said, &#34;Kevin must make a tremendous effort to resolve the internal sentiments at the Federal Reserve—he almost immediately turned to attacking the Federal Reserve after leaving.&#34;
Former Federal Reserve Vice Chairman Donald Kohn, who worked closely with Warsh, praised him as &#34;very smart—both intellectually and in his ability to interpret situations,&#34; but also expressed disagreement with many of Warsh's criticisms, &#34;especially the harsh tone in which those criticisms were made.&#34;
The challenges facing Warsh have few modern precedents: he must assess the impact of Trump's reshaping of the global trade landscape, judge the profound changes that artificial intelligence (AI) brings to productivity and the labor market, and also address the potential impact of the rise of digital assets on the banking regulatory system.
In recent television interviews and public appearances, Warsh has deliberately avoided giving specific answers to these considerations, frequently citing the experience of former Federal Reserve Chairman Greenspan—who chose to delay interest rate hikes due to moderate inflation pressures during the steady economic expansion of the mid-1990s.
On the policy agenda, Warsh has clearly identified reforming the Federal Reserve's balance sheet, which stands at $6.6 trillion, as a core goal. He believes the size of the Federal Reserve's assets is too large and that a new coordination mechanism should be established with the Treasury Department to weaken the Federal Reserve's direct influence on the money market.
<h2>Uncertainty Remains for Senate Confirmation</h2>
Warsh's Senate confirmation may be complicated by the recent announcement of a Department of Justice investigation into the Federal Reserve. On January 9, the Federal Reserve received a subpoena related to Powell's congressional testimony regarding the renovation project of the Federal Reserve headquarters in 2025. Powell issued a rare video statement condemning the investigation, and several Republican lawmakers defended the Federal Reserve
Including Republican Senator Thom Tillis from the Senate Banking Committee, several key senators have warned that Trump-nominated Federal Reserve candidates will face stricter scrutiny after the Department of Justice issued a subpoena to the Fed regarding Powell's comments on the Fed's renovation project.
Tillis stated on social media this Friday that Waller is &#34;a qualified nominee with a deep understanding of monetary policy,&#34; but he indicated that he would oppose the nomination until the aforementioned Fed investigation is resolved.
In the Banking Committee, which handles Federal Reserve nominations, Republicans hold a slight majority with 13 seats compared to the Democrats' 11. If all Democratic members oppose the nomination, Tillis's vote against it could prevent Waller from being approved. Republican leaders may then attempt to bypass the committee and bring the matter directly to the full Senate.
The Federal Reserve announced after its meeting this Wednesday that it decided to keep the policy interest rate unchanged, pausing action after cutting rates in three consecutive meetings leading up to December. The current target range for the federal funds rate is 3.5% to 3.75%. Futures market pricing indicates that investors expect rates to drop to around 3% by the end of 2026, but this level is still significantly higher than what Trump has publicly expressed as his expectation. In a December interview, Trump stated that he believes rates should be at 1% or lower

Trump stated that Waller did not promise him to cut interest rates, but he "certainly wants to cut rates." The "New Federal Reserve News Agency" believes that Waller's succession of Powell could be the most significant power transfer at the Fed since Volcker took office. Since Greenspan succeeded Volcker in 1987, every Fed chair has emphasized continuity with their predecessor. Waller, however, has committed to clearly breaking this tradition and completely rethinking the Fed's asset holdings, policy framework, economic role, and relationship with the executive branch

- Former Federal Reserve Governor Kevin Warsh is expected to be nominated by President Trump as the new Fed Chair, taking over in May 2026.  
- Warsh's previous support for rate cuts and his shift from a hawkish position align with Trump's desire for lower interest rates, causing market fluctuations.  
- However, his confirmation faces uncertainty due to a recent investigation into the Fed and criticism from within the central bank, making bipartisan support essential for his nomination.

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Trump is satisfied with "Powell's successor": No need for White House pressure, Waller will lower interest rates on his own