United States President Donald Trump has nominated former Federal Reserve Governor Kevin Warsh to head the US central bank when current Federal Reserve Chair Jerome Powell’s term ends in May.
The announcement on Friday caps a months-long, highly publicised search for a new chair of the Federal Reserve, widely regarded as one of the most influential economic officials in the world.
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It comes amid Trump’s public pressure campaign on Powell, whom he appointed during his first term but has repeatedly condemned for not cutting interest rates at the pace the president would like.
“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 posted on his Truth Social site. “On top of everything else, he is ‘central casting,’ and he will never let you down.”
The statement referenced the apparent compromise Warsh represents. The 55-year-old is known to be in Trump’s orbit and has recently called for lower interest rates, although he is expected to stop short of the more aggressive easing associated with some other potential candidates for the job.
Still, he is expected to face a punishing Senate confirmation hearing, with US lawmakers likely to be particularly critical given Trump’s public comments and the Department of Justice’s decision earlier this month to open a criminal probe into Powell.
Critics, including Powell, have said Trump’s actions seek to undermine the Federal Reserve’s independence and pressure the agency to set monetary policy aligned with the president’s wishes.
What does the Federal Reserve do?
The Federal Reserve has long been seen as a stabilising force in global financial markets, due in part to its perceived independence from politics.
It is tasked with combating inflation in the US while also supporting maximum employment. It is also the nation’s top banking regulator.
The agency’s rate decisions over time influence borrowing costs throughout the economy, including for mortgages, car loans and credit cards.
In a statement, Senator Elizabeth Warren, the top Democrat on the US Senate Banking Committee, said, “This nomination is the latest step in Trump’s attempt to seize control of the Fed.”
She pointed to the investigation into Powell, as well as Trump’s effort to push out Fed Governor Lisa Cook, which is currently being challenged before the US Supreme Court.
“No Republican purporting to care about Fed independence should agree to move forward with this nomination until Trump drops his witch-hunt,” Warren said.
Republican Senator Thom Tillis, meanwhile, said he would not vote to confirm any nominee until the Department of Justice probe into Powell is ended.
“Protecting the independence of the Federal Reserve from political interference or legal intimidation is non-negotiable,” he said in a statement.
Still, some Republicans welcomed the nomination.
“No one is better suited to steer the Fed and refocus our central bank on its core statutory mandate,” Republican Senator Bill Hagerty said in a statement.
If Warsh is confirmed, it remains unclear whether Powell would immediately step down or finish out his term. Traditionally, Federal Reserve chairs step aside as soon as their replacement is appointed, but the political situation has led to speculation Powell could stay on as long as possible.
Who is Warsh?
Warsh is currently a fellow at the right-leaning Hoover Institution and a lecturer at the Stanford Graduate School of Business.
He was a member of the Federal Reserve’s board from 2006 to 2011 and became the youngest Federal Reserve governor in history when he was appointed at age 35.
He was an economic aide in George W Bush’s Republican administration and was an investment banker at Morgan Stanley. His father-in-law is Ronald Lauder, heir to the Estee Lauder cosmetics fortune and a longtime donor and confidant of Trump’s.
Warsh has historically supported higher interest rates to control inflation, but has more recently argued for lower rates.
He has been a vocal critic of current Federal Reserve leadership, calling for “regime change” and criticising Powell for engaging on issues like climate change, which Warsh has said are outside the role’s mandate.
Reporting from Washington, DC, Al Jazeera’s Kimberly Halkett said Warsh’s experience means his appointment will likely be well received by the markets.
“The consensus is that in the short term, yes, this is a nominee who will do what the president has asked,” she said.
“But what he could do long term as chair of the board is very similar, ironically, to what Jerome Powell, the current board chair, is doing right now,” she said.
“That is having independence – making decisions based on economic data and not necessarily on political whims of a president.”
