Kevin Warsh, Ex-Federal Reserve Official, Picked By Trump As Next Chair Of Fed

US President Donald Trump said on Friday that he will nominate former Federal Reserve official Kevin Warsh as the next chair of the Fed. After current chair Jerome Powell's term expires in May, Warsh would replace him.

Trump has repeatedly assailed Powell for not cutting interest rates quickly enough, although he chose him to lead in 2017.

Trump considered appointing Warsh as Fed chair during his first term, though ultimately he went with Powell. Warsh's father-in-law is Ronald Lauder, heir to the Estee Lauder cosmetics fortune and a long-time donor and confidant of Trump's.

The Republican leader has said that the Fed's key rate should be as low as 1 per cent. far below its current level of about 3.6 per cent. This makes Warsh an unlikely pick for Trump, as he has long been a hawk who supports higher interest rates to control inflation.

Warsh had objected to some of the low-interest rate policies that the Fed pursued during and after the 2008-09 Great Recession. He also often expressed concern at that time that inflation would soon accelerate, even though it remained at rock-bottom levels for many years after that recession ended.

However, he has changed his stance recently by saying that he supports lower rates. He has called for "regime change" in the Fed and assailed Powell for engaging in issues like climate change and diversity, equity and inclusion, which Warsh said are outside the Fed's mandate.

The move could bring the Fed closer to the White House, and Trump could assert more control over the agency. In August he tried to fire Lisa Cook, one of seven governors on the Fed's board, in an effort to secure a majority of the board. He has appointed three other members, including two in his first term. Cook sued to keep her job, and the Supreme Court seemed inclined to let her be at the job while the suit settles.

If confirmed by the Senate, Warsh would face challenges in pushing interest rates much lower. The chair is just one member of the Fed's 19-person rate-setting committee, with 12 of those officials voting on each rate decision. The committee is already split between those worried about persistent inflation, who'd like to keep rates unchanged, and those who think that recent upticks in unemployment point to a stumbling economy that needs lower interest rates to bolster hiring.

In a July interview on CNBC, Warsh said Fed policy "has been broken for quite a long time."

"The central bank that sits there today is radically different than the central bank I joined in 2006," he added. By allowing inflation to surge in 2021-22, the Fed "brought about the greatest mistake in macroeconomic policy in 45 years that divided the country."