Who is Kevin Warsh, the man expected to become the next Fed chair?
US President Donald Trump has said he will name his pick for Federal Reserve chair on Friday, ending months of speculation over who will replace Jerome Powell at the head of the US central bank.
Trump said on Thursday evening that he would confirm the name of his candidate “tomorrow morning”, somebody who “is very respected, somebody that’s known to everybody in the financial world”.
Rumours have since run riot over who will take the top spot, amid speculation that White House officials have soured on the candidacy of Black Rock executive Rick Reider.
This led former Fed governor Kevin Warsh to emerge as the front runner, with a surge of bets on Warsh to be nominated on the Polymarkets prediction site.
His chances rose to 94 per cent on Friday, in comparison to Reider’s minimal three percent.
Fed governor Christopher Waller and White House economist Kevin Hassett are also finalists for the position.
But who is the man expected to take on of the most powerful roles in the US government, with susbstantial influence over not just the world’s largest economy but also the global economy.
From Wall Street to Washington
Warsh is no stranger to the world’s largest central bank, having served as Federal Reserve governor on the Fed’s Board from 2006 to 2011, the youngest to serve having been nominated at just 35.
He also previously interviewed for the top job in 2017 before it ultimately went to Jerome Powell.
Warsh is also a familiar face across both the US’s business and political spheres, known for his connections both on Wall Street and in Washington.
He served as an economic adviser for the George W. Bush administration, focusing on domestic finance, banking and regulatory policy.
Prior to his work at the White House, he worked at financial services firm Morgan Stanley from 1995 to 2002, where he operated within the M&A division, eventually rising to the executive director of the department during his tenure.
He is now a lecturer at the Stanford Graduate School of Business and has roles at the courier UPS, the Korean e-commerce company Coupang and the Duquesne Family Office, the invesment firm of the billionaire Stanley Druckenmiller.
Close relationship
Warsh is also known to have a close relationship with Trump, reportedly having previously advised him on economic policy.
But some viewed his hawkish stance during his time at the Fed as a barrier to gaining the president’s trust for the top job.
However, Warsh has advocated for a “regime change” at the bank, calling for the Fed to reduce the size of its balance sheet, a take Treasury Secretary Scott Bessent also shares.
Analysts have coined his call for a shakeup at the Fed as key to securing the role.
Neil Wilson, UK investor strategist at Saxo, said: He was quite a hawkish governor back the day and he favours shrinking the Fed’s balance sheet, though he has since said the Fed should be cutting rates, otherwise he would not be getting the job.
“He’s seen a bit more of a hawk perhaps than the market had wanted or expected and could restore a bit of faith in the institutional independence of the Fed, which is a critical point.
His appointment should be a net positive for the US dollar and reduce the chances of another big drop.”
Dan Coatsworth, head of markets at AJ Bell, also noted that Warsh is a “more orthodox choice” but the uptick in dollar on Friday in the wake of speculation suggests he “won’t be a marionette for the Trump administration” and could potentially forgo aggressive rate cuts the President wishes for.
But Trump has made it clear he wants borrowing costs to fall to roughly one per cent, and has said any candidate must be willing to cut rates.
Coatsworth said: “Whether Warsh will transform from a hawk to a dove thanks to external pressure, assuming he gets the job, will only become clear over time.”
The downfall of Powell
Powell, who has repeatedly faced Trump’s wrath over his reluctance to slash interest rates will step down in May.
The Fed held borrowing costs at a 3.5 per cent to 3.75 per cent range on Wednesday, prompting Trump to post on Truth Social that Powell had “absolutely no reason” to keep interest rate highs.
Trump’s ongoing attacks on the Fed have raised alarms in financial markets, questioning its independence.
The odds for Hassett, a close ally to Trump, plummeted after pushback from senators, including Republican Thom Tillis, over the White House launching a criminal investigation of Powell’s testimony which the Fed defended.
Powell said the Department of Justice’s decision to serve him with grand jury subpoenas over a renovation of the Fed’s headquarters was “a pretext” aimed at pressuring the Fed into making more rate cuts.