Trump Taps 'Whole Package' Kevin Warsh From 'Central Casting' For Fed Chair

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Donald Trump named Kevin Warsh to be the next chair of the Federal Reserve, ending months of speculation over who’d take charge of US interest rates as the president pushes for big cuts. “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote on his Truth Social platform. “On top of everything else, he is ‘central casting,’ and he will never let you down.” Speaking to reporters later Friday, Trump — who’s repeatedly blasted the Powell Fed for not lowering rates fast enough — said he had not asked Warsh to commit to cuts. “No, but we talk about it, and I’ve been following him, and I don’t want to ask him that question,” Trump said. “I think it’s inappropriate, probably.” Bloomberg TV and Radio International Economics & Policy Correspondent Michael McKee and Katy Kaminski, Chief Research Strategist and Portfolio Manager at AlphaSimplex Group, join Bloomberg Businessweek Daily to discuss. They speak with Carol Massar and Tim Stenovec. Kevin Warsh waited almost a decade before finally clinching President Donald Trump’s nomination to be chair of the Federal Reserve. He won’t need to wait as long before his first big test in the job. Having won the race with a promise of “regime change” at the Fed, suggesting he would make significant changes, Warsh has pledged to shrink the Fed’s balance sheet and argued that a productivity boom driven by artificial intelligence will keep inflation low. While that prognosis was enough to convince Trump, his Fed pick will now need to convince fellow policymakers and investors. After cutting rates three times late last year the Fed hit pause in January amid persistent inflation, signs of a stabilizing labor market and expectations for stronger growth in 2026. Traders aren’t pricing another rate cut until June, at the earliest. The tension in Trump’s demand for cheaper borrowing costs may ultimately be resolved by a weakening labor market or lower inflation. Such a backdrop would greenlight Warsh to push for more rate cuts, and possibly win support from other policymakers. Kevin Warsh, President Donald Trump’s pick to lead the US Federal Reserve. But if those conditions don’t play out, then delivering on his promises will prove much more difficult, according to TS Lombard economist Dario Perkins. “The last thing an economist needs is to be given an opportunity to put their theories to test,” Perkins said. “It will be his reputation on the line, a sort of winner’s curse.” Withering Criticism While Warsh is not viewed as being as close to Trump as Kevin Hassett, the White House insider he beat out for the Fed job, his views have fueled worries that he, too, might buckle to White House demands for much lower rates despite persistent price pressures. His previous withering public criticism of the Fed and praise for Trump came as the White House hammered policymakers for not cutting rates fast enough. An unprecedented Department of Justice investigation related to the overspend on renovations to the Fed’s headquarters has only stoked concerns that Trump is seeking to remold the US central bank.  US INSIGHT: What a Kevin Warsh Fed Chairmanship Could Look Like Analysts warn that pushing rates much lower during a time of persistent inflation and surging debt could rattle investor confidence, sending bond yields — and real borrowing rates — higher.  “He knows he will need to use his considerable skills to marshal evidence and analysis to support the direction he wants to take policy,” said Donald Kohn, who served as vice chair of the Federal Reserve during the 2008 financial crisis when he worked alongside Warsh, who was a governor at that time.  Ultimately, a Fed chair will be driven to do what is right for the economy, and any rhetoric used to secure the job should be viewed through that political lens, according to Michael Faulkender, former deputy to Treasury Secretary Scott Bessent. “Irrespective of what someone says when they are a candidate for the position, a Fed chairman knows that his responsibility is to keep inflation low,” he said. . -------- Watch Bloomberg Radio LIVE on YouTube Weekdays 7am-6pm ET WATCH HERE: http://bit.ly/3vTiACF Follow us on X: https://twitter.com/BloombergRadio Subscribe to our Podcasts: Bloomberg Daybreak: http://bit.ly/3DWYoAN Bloomberg Surveillance: http://bit.ly/3OPtReI Bloomberg Intelligence: http://bit.ly/3YrBfOi Balance of Power: http://bit.ly/3OO8eLC Bloomberg Businessweek: http://bit.ly/3IPl60i Listen on Apple CarPlay and Android Auto with the Bloomberg Business app: Apple CarPlay: https://apple.co/486mghI Android Auto: https://bit.ly/49benZy Visit our YouTube channels: Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts Bloomberg Television: https://www.youtube.com/@markets Bloomberg Originals: https://www.youtube.com/bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake