President Donald Trump on Friday nominated Kevin Warsh to replace Jerome Powell as Federal Reserve chairman, ending five months of unprecedented turmoil over the central bank.
The decision is the culmination of a process that formally began last summer, but began much earlier, with Trump launching a flurry of criticism of Powell’s Fed since he took office in 2018.
“I have known Kevin for a long time and have no doubt that he will go down as one of the great Fed Chairs, perhaps one of the best,” President Trump said in a post on Truth Social announcing his selection.
Mr. Warsh, 55,’s selection is unlikely to cause market ripples, given his past experience at the Fed and Wall Street’s view that he will not always follow President Trump’s orders.
“He has the respect and confidence of the financial markets,” David Bernsen, chief investment officer of Bernsen Group, told CNBC’s “Squawk Box.”
Bahnsen added: “There’s no one I’ve ever considered for this job who wouldn’t cut rates in the short term. But I believe he will be a reliable candidate in the long term.”
Since Powell was confirmed in 2018 during the Trump administration’s first term, he has relentlessly lobbied policymakers to aggressively lower interest rates. Despite cutting rates three times in a row in late 2025, the president went on the offensive, demanding lower rates and criticizing Powell for cost overruns on a major renovation of the Fed’s Washington, D.C., headquarters.
Meanwhile, in an interview with CNBC last summer, Warsh called for “systemic change” at the Fed.
“The lack of credibility, in my view, lies with the incumbent at the Fed,” he said in a July interview. He is a potentially adversarial position in an institution where consensus-building is key to policy implementation.
Mr. Trump’s decision to nominate Mr. Warsh comes at one of the most volatile times in decades for the U.S. central bank, with inflation still not fully overcome, government borrowing rising and the Fed itself facing unusually direct political pressure over how it conducts monetary policy.
Most recently, the Justice Department subpoenaed Mr. Powell regarding a construction project. In a rare candid response, Chairman Powell accused the move of being an “excuse” to encourage the Fed to comply with President Trump’s orders and ease policy further.
To this end, the nominations come as questions about the Fed’s independence, the bedrock of central bank credibility, have moved from academic debate to concern. Trump and other administration officials have floated a variety of ideas, ranging from stronger White House oversight to changing the way the central bank sets interest rates, including forcing the chair to consult with the president on interest rate decisions.
The nominations end a competitive derby that at one point had 11 candidates. The interview process, led by Treasury Secretary Scott Bessent, included everyone from former and current Fed officials to prominent economists and Wall Street experts. Ultimately, the field was narrowed down to five or four, and President Trump hinted on CNBC last week that he had made his choice.
From here, candidates face a tough road.
Republican Sen. Thom Tillis said he would block the Fed’s nomination until the Justice Department’s investigation is complete. But the problem is not just political.
Although President Trump claims inflation has been defeated, it remains well short of the Fed’s 2% goal. At the same time, the labor market is slowing and the economy is now in a no-fire, no-hire situation, creating new challenges for Fed policy.
In any case, the market is not expecting any major action from the new chairman. Traders are pricing in up to two more rate cuts this year before the benchmark federal funds rate lands near 3%, which policymakers have signaled is a long-term “neutral” rate that neither boosts nor detracts from economic growth.
The next question is what will happen to Mr. Powell.
In the past, chairmen have resigned from their positions at the Fed after being removed from the chair, but that may not be the case this time. Mr. Powell, who has two years left in his term as governor, could choose to serve as a bulwark against President Trump’s efforts to threaten the Fed’s independence. The Supreme Court is already considering President Trump’s move to remove Lisa Cook from office, and the case could ultimately determine what power the president has over the Fed’s directors.
