Trump's Fed nomination to ease market uncertainty, all eyes on Warsh

• Warsh is viewed as one of the more hawkish candidates, favoring a smaller Fed balance sheet while also supporting lower rates, creating potential tension with Trump's preference for looser monetary policy
• The nomination will be scrutinized for the candidate's ability to resist political pressure from Trump, who has publicly criticized Powell and demanded deeper interest rate cuts
• Other candidates considered included Fed Governor Christopher Waller and BlackRock's Rick Rieder, while early frontrunner Kevin Hassett is now expected to remain as White House economic adviser

Summary: Trump's Fed Nomination and Market Implications

President Donald Trump announced he would nominate a new Federal Reserve chair on Friday, January 29, with former Fed Governor Kevin Warsh widely expected to receive the nod following his White House meeting with Trump on Thursday. Bloomberg News reported Warsh as the likely selection.

Key Candidate Profile:

Warsh is viewed as a hawkish candidate among potential nominees, which could signal tighter monetary policy ahead. He has advocated for "regime change" at the Fed, including a smaller balance sheet, though he's also on record supporting lower interest rates. This dual position presents a potential conflict with Trump's preference for deeply cut rates and looser monetary policy.

Other Candidates:

• Fed Governor Christopher Waller and BlackRock's Rick Rieder were also considered frontrunners
• White House economic adviser Kevin Hassett, initially a top contender, is now unlikely after Trump indicated he prefers keeping him in his current role

Market Reaction:

The dollar rose Friday on speculation about Warsh's nomination, recouping recent losses. Markets interpreted the potential selection as less dovish than alternatives, particularly Kevin Hassett. Analysts noted the currency strength reflects concerns about what tighter Fed balance sheet policy might mean for markets.

Broader Context:

Trump has publicly criticized current Fed Chair Jerome Powell (nicknamed "Too Late") for hesitancy in cutting rates. Powell's term ends in May. The nomination carries significant weight as it will signal monetary policy direction affecting bank lending rates, Treasury yields, and broader borrowing costs for consumers and businesses. Analysts emphasize the importance of the nominee's ability to resist political pressure while maintaining the Fed's inflation-fighting credibility and ensuring U.S. financial stability.