Newsflash: Donald Trump has decided to nominated Kevin Warsh as the next head of America’s central bank, the Federal Reserve,In a post on Truth Social, the US president says he has “no doubt” that Warsh will be “one of the GREAT Fed Chairmen, maybe the best”,That’s not a surprise, given the president’s hints last night that he would choose “somebody that could have been there a few years ago” (Warsh lost out in 2017),But as we’ve been blogging this morning, while Warsh now favours lower interest rates he’s seen as less likely to push for aggressive cuts than some other candidates,Trump says:I am pleased to announce that I am nominating Kevin Warsh to be the CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

Kevin currently serves as the Shepard Family Distinguished Visiting Fellow in Economics at the Hoover Institution, and Lecturer at the Stanford Graduate School of Business.He is a Partner of Stanley Druckenmiller at Duquesne Family Office LLC.Kevin received his A.B.from Stanford University, and J.

D,from Harvard Law School,He has conducted extensive research in the field of Economics and Finance,Kevin issued an Independent Report to the Bank of England proposing reforms in the conduct of Monetary Policy in the United Kingdom,Parliament adopted the Report’s recommendations.

Kevin Warsh became the youngest Fed Governor, ever, at 35, and served as a Member of the Board of Governors of the Federal Reserve System from 2006 until 2011, as the Federal Reserve’s Representative to the Group of Twenty (G-20), and as the Board’s Emissary to the Emerging and Advanced Economies in Asia,In addition, he was Administrative Governor, managing and overseeing the Board’s operations, personnel, and financial performance,Prior to his appointment to the Board, from 2002 until 2006, Kevin served as Special Assistant to the President for Economic Policy, and Executive Secretary of the White House National Economic Council,Previously, Kevin was a member of the Mergers & Acquisitions Department at Morgan Stanley & Co,, in New York, serving as Vice President and Executive Director.

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.On top of everything else, he is “central casting,” and he will never let you down.Congratulations Kevin! PRESIDENT DONALD J.TRUMPTime to wrap upStocks have dipped on Wall Street, the dollar has rallied, and gold has fallen back after Donald Trump announced he was nominating former Federal Reserve governor Kevin Warsh as the next Fed chair.The move ends months of speculation about who the president would pick to replace Jerome Powell, as he waged an extraordinary campaign to influence policymaking at the Fed by repeatedly calling for interest rate cuts.

Powell’s second term as chair is due to end in May.Writing on his Truth Social platform, Trump said: “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.On top of everything else, he is ‘central casting’, and he will never let you down.”Warsh, 55, a former Federal Reserve governor who has deep ties to Wall Street, had previously interviewed for the job of chair in 2017 when the role went to Powell, whose term ends in May.Trump’s pick will have to be confirmed by the Senate….

and Thom Tillis, a senator from North Carolina, is sticking with his pledge to block all Federal Reserve nominations until the Department of Justice investigation into Fed chair Jerome Powell is concluded.The choice of Warsh was applauded by Canada’s prime minister Mark Carney, and former UK chancellor George Osborne.But some financial analysts questioned whether Warsh would stick to his reputation as a hawkish policymaker, or might now be converted to Donald Trump’s campaign for lower interest rates.Amid this uncertainty, the Dow Jones industrial average is currently down 122 points or 0.23% at 48,959 points.

Gold, which has benefitted from forecasts of currency debasement, is down 6.5% today at $5,050 an ounce.Here’s the full story:And here’s our US Politics Live blog:The Russell 2000 index, which tracks thousands of small company stocks, is down almost 1% in morning trading in New York.Warsh won’t get an easy ride through Congressional confirmation, predicts Kathleen Brooks, research director at XTBThere are two factors to consider here: 1, Warsh has changed his stance in recent months and has become a lot more dovish, which is probably why Trump picked him to be Fed chair.2, it will not be easy for Warsh to get confirmation from Congress, as Trump faces accusations of eroding Fed independence.

Already on Friday, Republican Congressman Thom Tillis has said that he will oppose the President’s nomination of Warsh as Fed chair until the federal probe of Jerome Powell is resolved.Thus, if Warsh has shifted from a hawk to a dove, it could take time for rate cuts to feed through.A Warsh-led Fed could lead to more volatility in the markets, fears Sonu Varghese, vice president and global macro strategist at Carson Group:Kevin Warsh as the nominee for Fed Chair means we could actually end up with a Fed that tilts hawkish at the margin.Warsh has historically been a hawk, even though he’s been talking rate cuts lately.If he walks into the Fed with aggressive cuts as his baseline, he may not have a lot of credibility selling others on the need for further rate cuts.

And we may even end up with a deeply divided committee that doesn’t cut at all.In the immediate term, a potentially hawkish Fed could increase volatility.Former UK chancellor George Osborne has laid his praise for Kevin Warsh on with a trowel, posting:Kevin Warsh is a excellent choice as Chair of the Fed - smart, serious, experienced, knows the new economy as well as the old.I’ve been fortunate enough to know him for more than twenty years and this is the job he was put on earth to do.The world feels a little safer - and more prosperous - today.

Kevin Warsh is a excellent choice as Chair of the Fed - smart, serious, experienced, knows the new economy as well as the old.I’ve been fortunate enough to know him for more than twenty years and this is the job he was put on earth to do.The world feels a little safer - and…Wall Street has opened in the red, as traders react to Donald Trump’s choice of the next Fed chair.It’s only a small dip, though, as the markets try to assess how Kevin Warsh might steer the Federal Reserve.The S&P 500 share index is down 0.

17%, or 11 points, at 6,957,26,The Dow Jones industrial average, which tracks 30 large US companies, is 0,25% lower, and the tech-focused Nasdaq is 0,45% lower.

Investors are trying to assesss whether Warsh will stick to his former reputation as a hawkish policymaker who opposed the expansion of the Fed’s QE stimulus programme, or is really a convert to lower interest rates.Kathy Jones, chief fixed income strategist at Schwab Center for Financial Research, sums up the question:Warsh is chosen for next Fed Chair.Markets down as he was a hawk in previous time at Fed.The question is will he change his views to please the president?Scott Helfstein, head of investment strategy at Global X ETFs, says:The Warsh nomination should be good for markets in general, but there is one area worth watching.Warsh has expressed interest in shrinking the Fed balance sheet as a means to ensure the bank’s independence from policymakers.

That could drive some volatility in the rates market that spills into equities and credit spreads,”There’s now a “significant uphill battle” between the nomination of Kevin Warsh and the end goal of aligning the Federal Reserve to the White House, argues George Lagarias, chief economist at Forvis Mazars,“First, the Senate approval hurdle needs to be overcome,Not only will Mr Warsh need to prove that he will maintain the Fed’s independence in front of the Senate, contrary to expectations and previous statements, but he will have to navigate through Republican Senator Tom Tillis’s block threat, due to the Department of Justice’s investigation of the US central bank,“Assuming those hurdles are cleared, then the position itself is in question.

For a Fed Chair to be installed, a position needs to be vacated,If, however, Jerome Powell decides to stay as a Fed Board member until 2028, then the only position available will be that of Stephen Miran, the President’s man on the Board,“Even if a solution is reached, and Mr Warsh is sworn in, we’d still have to wait and see how he could sway enough independent governors to align with the White House and vote for sharp rate cuts, even as inflation remains persistent,The Fed Chair’s power is to set the agenda and speak for the Fed,Otherwise, he’s just one vote.

“And we yet don’t know whether that would be his inclination at all.Once sworn in, his tenure would outlast the President’s, so he would be, technically, free from any obligation.[Miran’s tenure is due to end this weekend, but according to Semafor he is “marooned” at the Fed due to Senator Thom Tillis’s pledge to block any Trump’s nominees until the Justice Department ends its criminal investigation into Fed chair Powell]Canada’s prime minister, Mark Carney – a former top central bank governor of both Canada and the UK – has endorsed Donald Trump’s choice.Carney has posted on X:Kevin Warsh is a fantastic choice to lead the world’s most important central bank at this crucial time.Kevin Warsh is a fantastic choice to lead the world’s most important central bank at this crucial time.

Kevin Warsh est le meilleur choix pour diriger la banque centrale la plus importante au monde en ce moment charnière.https://t.co/jmVDNNOFbSBack in the financial markets, the US dollar is strengthening again after new economic data shows inflation pressures building.The Producer Price Index for final demand increased 0.5% in December, the US Bureau of Labor Statistics has reported, up from 0.

2% in October.The increase was due to a 0.7% rise in the index for final demand services, while goods prices were unchanged.Rising PPI might concern policymakers at the Federal Reserve, and make them less keen to vote to cut interest rates…The dollar index is now up 0.35% today, with the pound down by over half a cent at $1.

3745.You can get a flavour of Kevin Warsh’s thinking by reading a lecture he gave to the IMF’s spring meeting in Washington DC last April.It was the annual G30 lecture (the G30 are group of financiers and academics); Warsh was a substitute speaker as the first choice cancelled to become prime minister (of Canada, presumably?).In the speech, Warsh argued that the predominant risk to the economy come from choices made inside the four walls of our most important economic institutions.He called for significant improvement in the governance regime, saying:This historic place – the convening chambers of the IMF and the World Bank –is a fitting venue.

After World War II, an economic and security commons led by the United States advanced the interests of freedom and liberty for much of the 20th century.1 It included consequential roles for many of the nations and institutions represented in this room.The 21st century, however, has been decidedly less kind, especially to the least well-off among our citizens.Shocks, economic and geopolitical, have been fierce and frequent.Key economic institutions that served us well for decades have fallen short of their promises.

Absent fundamental reform, we should question if their high summer is past.He then went on to criticise ‘institutional drift’ at the Fed, claiming it has “acted more as a general-purpose agency of government than a narrow central bank”.And he argued that the current Fed policy of ‘data dependence’ has little real value, while also slamming its near-term forecasting:As Warsh put it:Once policymakers reveal their economic forecast, they can become prisoners of their own words.Fed leaders would be well-served to skip opportunities to share their latest musings.The swivel chair problem, rhetorically waxing and waning with the latest data release, is common and counter-productive.

And finally, he rubbished the Fed’s “forward-guidance”, saying:Moving markets with rolling Fed incantations is tempting, but unhelpful to the Fed’s deliberations, and ultimately, to its mission.The central bank should find new comfort in working without applause and without the audience at the edge of its seats.Luke Bartholomew, deputy chief economist at Aberdeen Investments, calls Warsh a ‘credible’ choice:“Warsh’s experience on the Fed, where he developed a reputation as a very competent crisis fighter with a good understanding of financial markets, and long track record of independent thought about monetary policy, means he is a credible nomination.As chair, he will almost certainly push for lower interest rates, consistent with our forecast of two 25bps cuts later this year.But he is unlikely to make much progress in shifting the Fed’s operating framework and shrinking its balance sheet, taking much of the potentially hawkish sting out of his tail.

”Kevin Warsh “seems a relatively benign pick” when it comes to the issue of Fed independence front, argues ABN Amro’s senior US economist Rogier Quaedvlieg,He is not clearly in camp Trump, and despite having a different view on monetary policy compared to the consensus of the FOMC over the past years, we don’t see this nomination as a further attack on the Fed’s independence,It remains important to realize that interest rates are set by a majority vote of a 12-member Committee, and the Chair’s power to influence consensus has limits,Until then, confirmation of Warsh may take some time, with Senator Thom Tillis, a member of the banking committee, saying that he will block any nominee until the subpoenas for current chair Powell have been resolved (see earlier post),Out of the four shortlisted candidates, we see Warsh as the most likely of still being confirmed relatively quickly.

Thom Tillis, a senator from North Carolina, is sticking with his pledge to block all Federal Reserve nominations until the Department of Justice investigation into Fed chair Jerome Powell is concluded.Posting on X, Tillis – a member of the banking committee that oversees Fed appointments – says:Kevin Warsh is a qualified nominee with a deep understanding of monetary policy.However, the Department of Justice continues to pursue a criminal investigation into Chairman Jerome Powell based on committee testimony that no reasonable person could construe as possessing criminal intent.Protecting the independence of the Federal Reserve from political interference or legal intimidation is non-negotiable.My position has not changed: I will oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman, until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved