2026-03-05 09:00:21

Why did Trump nominate “Eagle” Warsh as Federal Reserve Chair?

On January 30, U.S. President Trump announced that he was nominating former Federal Reserve member Kevin Warsh as the next Federal Reserve Chair. This announcement immediately triggered strong market volatility. The appointment is seen as a signal of significant adjustments in the current Federal Reserve monetary policy, which will have a profound impact on the global financial markets.

On March 4, the White House officially submitted Kevin Warsh’s nomination for Federal Reserve Chair to the Senate. Warsh previously served as a Federal Reserve member during the financial crisis, and now, amid market uncertainty caused by inflation that has not fully eased and tensions related to the Iran war increasing fiscal pressure, he is pushed to the forefront of monetary policy. This selection not only concerns interest rate paths but is also viewed as an important signal that Trump is seeking a new balance between wartime fiscal policies and the position of the US dollar.

Why does Trump strongly support lowering Federal Reserve interest rates?
Fiscal and monetary policies are primary tools for macroeconomic management. Since regaining control of the White House, Trump has implemented loose fiscal policies, cutting taxes significantly through the “Big and Beautiful Bill,” permanently lowering corporate income tax to 21%, stimulating corporate investment and increasing jobs; as well as raising import tariffs and implementing a “balanced tariff” policy to curb imports, while closing fiscal deficits by adding new tariffs, forcing foreign companies to increase investment in the US.
Additionally, Trump wants the Federal Reserve to align its policies with his fiscal and tariff policies, drastically lowering the federal funds rate below 1%, thereby reducing corporate financing costs and directing more funds into the industrial sector and companies. Furthermore, with the upcoming midterm elections, Trump is eager to stimulate investment through interest rate cuts, achieve high employment and low inflation, to increase the chances of Republican victory.
Moreover, Trump has also urged the Federal Reserve to cut interest rates to reduce US debt pressure. By August 2025, the total US national debt reached a record $37 trillion, exceeding 120% of GDP, with interest payments surpassing US defense spending during the same period. Lowering the Fed funds rate would help the government issue new debt to pay off old debt and reduce fiscal deficits. However, the independence of the Federal Reserve is protected by Congress legislation. Its monetary policy aims to control inflation and promote full employment with minimal government intervention.
Regarding Trump’s repeated calls for “interest rate cuts to save the market,” the Federal Reserve’s stance has been cautious. Since September 2024, the Fed has cut interest rates six times—reducing the target range to 3.50%–3.75%—but current rates are still far from Trump’s expectations.
As a result, disagreements often arise between Trump and Fed Chair Powell. Trump hopes to find a “reliable person” to push for rate cuts, create a relatively loose monetary policy environment, and help achieve his campaign goal of “Making America Great Again.”

Why did Trump choose Warsh?
According to the “Federal Reserve Act,” the President has the authority to nominate the Federal Reserve Chair. Since August 2025, Trump has been in the process of selecting the next Fed Chair. The final decision to nominate Warsh is based on the following reasons:
First, Warsh aligns with Trump’s views. From 2006 to 2025, despite differences over fiscal policy, foreign trade, and cryptocurrencies, Warsh emphasized the importance of market mechanisms, opposed excessive government intervention, and supported practical monetary policies and balance sheet reduction to create room for interest rate cuts, as well as supporting “balanced tariffs.” This stance aligns with Trump’s views and policies.
Second, Warsh has the qualifications and capability to be Fed Chair. He has a comprehensive educational background and work experience: a degree from Stanford University focusing on public policy, a J.D. from Harvard; he previously worked at Morgan Stanley in mergers and acquisitions in New York, understanding financial market operations; also served as Special Assistant for Economic Policy to President George W. Bush and as Secretary of the White House National Economic Council; he has been a member of the Federal Reserve Board, mastering monetary policy operations, financial supervision, and market psychology, thus recognized as a “senior banker.”
Third, he is likely to gain Senate approval. The President’s nominee for Fed Chair must be confirmed by the Senate to officially assume the position. Warsh, aged 56, energetic, open-minded, supportive of innovation and cryptocurrencies, previously left the Fed due to opposition to quantitative easing and advocating for monetary tightening. This “hawkish” stance benefits Trump by increasing the likelihood that his nomination will be approved—because if he pushes for rate cuts after taking office, he won’t be seen as a “Trump political puppet,” helping to maintain Fed independence.
Fourth, credibility from his network of relationships. Warsh’s father-in-law, Ronald Lauder, is one of the heirs of Estée Lauder and has been a close friend of Trump for decades. This close network of relationships makes Warsh regarded by Trump as a “trusted person” loyal to him.

Future direction of Federal Reserve monetary policy
If Warsh successfully gains Senate approval, he will serve as Fed Chair starting June 2026. At that time, he may accelerate rate cuts and implement more accommodative monetary policies. However, the scale and frequency of rate reductions will depend on the US economic performance, especially inflation and employment levels. Since the US dollar remains the dominant global currency, the Federal Reserve also has supra-sovereign influence.
The Fed’s monetary policy not only manages the US domestic economy but also, through interest rates, exchange rates, and expectations, quickly influences global asset pricing and capital flows, significantly impacting other countries’ economies and financial markets. Both developed and emerging markets are affected by Fed policy changes.
US inflation and employment data for the first half of this year will be key indicators in assessing future Fed monetary policy shifts. If US inflation rises or does not approach the 2% target, the likelihood of the Fed lowering interest rates will be very small, or if it does, the cuts will be limited. If layoffs increase and employment weakens, the chances of significant rate cuts will be higher.
Additionally, the trade balance is an important factor. If the trade deficit continues to grow, the Fed may have motives to lower interest rates to promote dollar depreciation and boost exports; conversely, if the deficit shrinks, similar policies might be adopted. It’s worth noting that six consecutive rate cuts have caused the dollar index to weaken. In 2025, the dollar depreciated against the euro by 16%, and gold prices surged past $5,500 per ounce, reaching record highs. Rate cuts will likely strengthen expectations of dollar depreciation and further weaken the appeal of dollar assets. IMF data shows that in 2025, the dollar’s share in global reserves fell to 56.92%, the lowest since 1995. If the Fed continues large-scale rate cuts, it will undoubtedly drive more capital into non-dollar currencies, accelerating global de-dollarization and shaking the dollar’s position as the world’s primary reserve currency.

It’s not hard to predict that if Warsh is elected Fed Chair and overly follows Trump’s wishes without adhering to rules in setting interest rates, it will damage the Fed’s independence and international reputation. Losing international trust would be a significant loss for the US and the dollar. Past experiences serve as lessons: when the Biden administration expelled Russia from SWIFT and weaponized the dollar, although it short-term increased US sanctions, it long-term weakened the dollar’s position as an international currency. Trust is far more important than gold. Complying with laws and regulations, maintaining Fed independence, and ensuring transparency and predictability in monetary policy are key to restoring market confidence in the Fed.

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Ryakpanda

2026-03-05 08:55:21

#比特币创下近一月内新高 Why did Trump nominate the "hawkish" Warsh to be Federal Reserve Chair?

On January 30, U.S. President Trump announced the nomination of former Federal Reserve Board member Kevin Warsh as the next Federal Reserve Chair. The announcement immediately caused strong market turbulence. This nomination is seen as a signal of significant adjustments to the current monetary policy of the Fed and will have a profound impact on global financial markets.

On March 4, the White House officially submitted Kevin Warsh’s nomination to the Senate. Warsh previously served as a Fed governor during the financial crisis and is now positioned at the forefront of monetary policy amid ongoing U.S. inflation that has yet to fully recede, the high fiscal pressures from the Iran war, and market uncertainties. This personnel choice not only concerns the interest rate path but is also viewed as a key signal of Trump seeking a new balance between wartime fiscal policy and the dollar’s status.

Why does Trump push for Fed rate cuts?
Fiscal policy and monetary policy are the most important macroeconomic management tools. Since re-entering the White House, Trump has implemented loose fiscal policies domestically, significantly cutting taxes through the "Big and Beautiful" Act, permanently lowering corporate income tax to 21%, stimulating corporate investment and increasing employment; externally, he raised tariffs, implemented a "reciprocal tariff" policy to suppress imports, and used new tariffs to offset fiscal deficits, forcing more foreign companies to expand investment in the U.S.
Meanwhile, Trump hopes the Fed will cooperate with his fiscal and tariff policies by sharply lowering the federal funds rate to below 1%, thereby reducing corporate financing costs and directing more funds toward businesses and industrial sectors. With the U.S. midterm elections approaching, Trump is eager to stimulate investment through rate cuts to achieve high employment and low inflation, thereby boosting the Republican Party’s electoral prospects.
Additionally, Trump’s demand for rate cuts aims to ease America’s debt repayment pressures. As of August 2025, the total U.S. national debt reached a record $37 trillion, with debt-to-GDP ratio exceeding 120%, and interest payments alone surpassing U.S. defense spending for the same period. Lowering interest rates benefits the government by enabling it to borrow new debt to pay off old debt and reduce fiscal deficits. However, the Fed’s independence is protected by legislation from Congress. Its monetary policy aims to achieve dual goals of controlling inflation and promoting full employment, with minimal government interference.
Regarding Trump’s repeated calls for "rate cuts to save the market," the Fed has been cautious. Since September 2024, the Fed has cut rates six times in a row—lowering the target range to 3.50%–3.75%—but the current rate level still falls far short of Trump’s expectations.
This has led to multiple disagreements between Trump and the current Fed Chair Powell. Therefore, Trump is seeking a "reliable person" to push for rate cuts, creating a relatively loose monetary policy environment to help achieve his campaign goal of "Making America Great Again."

Why did Trump choose Warsh?
According to the Federal Reserve Act, the President has the authority to nominate the Fed Chair. Since August 2025, Trump has been working on selecting his candidate for the next Fed Chair. The final decision to nominate Warsh is mainly based on the following reasons:
First, Warsh shares similar views with Trump. From 2006 to 2025, although Warsh has some differences with Trump on fiscal, trade, and cryptocurrency issues, he emphasizes the role of market mechanisms, opposes excessive government intervention, advocates for pragmatic monetarism and balance sheet reduction to create room for rate cuts, and supports "reciprocal tariffs." These positions are largely aligned with Trump’s policies and ideological stance.
Second, Warsh has the qualifications and capability to serve as Fed Chair. He has an excellent educational background and work experience: undergraduate studies in public policy at Stanford University, a J.D. from Harvard Law School; experience at Morgan Stanley’s M&A department in New York, understanding financial markets; served as Special Assistant to President George W. Bush on economic policy and as Executive Secretary of the White House National Economic Council; also served as a Fed governor, familiar with monetary policy operations, financial regulation, and market psychology, recognized as a "seasoned central banker."
Third, he is more likely to gain Senate approval. The President’s nominee for Fed Chair still needs Senate confirmation for official appointment. Warsh, aged 56, is energetic, open-minded, supports innovation and cryptocurrencies. He previously left the Fed due to opposition to quantitative easing and advocacy for monetary tightening. His hawkish stance favors Trump’s nomination being approved by the Senate—if he pushes for rate cuts after taking office, he is less likely to be seen as a "political puppet" of Trump, which helps maintain the Fed’s independence.
Fourth, his network of contacts is highly credible. Warsh’s father-in-law, Ronald Lauder, is one of the heirs of Estée Lauder and a longtime friend of Trump. This close personal connection makes Warsh trusted by Trump as a "trusted insider."

Future direction of Fed monetary policy
If Warsh successfully gains Senate approval, he will assume the Fed Chair position in June 2026. At that time, he may accelerate rate cuts and implement a more accommodative monetary policy. However, the magnitude and frequency of rate cuts will depend on the U.S. economic performance, especially inflation and employment conditions. Due to the dollar’s long-standing dominance as the world’s reserve currency, the Fed also wields supra-sovereign influence.
The Fed’s monetary policy not only regulates the U.S. economy but also quickly influences global asset pricing and capital flows through interest rates, exchange rates, and expectations, exerting significant impact and shocks on economies and financial markets worldwide. Both developed and emerging markets are inevitably affected by changes in Fed policy.
This year’s first-half U.S. inflation and employment data will be key indicators for future Fed policy shifts. If inflation rises or does not converge toward the 2% target, the likelihood of rate cuts will be small, or if cuts occur, they will be limited. If corporate layoffs worsen and employment weakens, the probability of rate cuts will increase.
Trade balance is another important factor. If the trade deficit continues to widen, the Fed may be motivated to cut rates to weaken the dollar and encourage exports; conversely, if the trade deficit narrows, the opposite may happen. Notably, six consecutive rate cuts have already caused the dollar index to decline. In 2025, the dollar depreciated 16% against the euro, gold broke through $5,500 per ounce, reaching a historic high. Rate cuts will undoubtedly reinforce dollar depreciation expectations and further weaken the appeal of dollar assets. According to IMF data, in 2025, the dollar’s share of global foreign exchange reserves fell to 56.92%, a new low since 1995. If the Fed continues to cut rates sharply, it will likely drive more capital into non-dollar currencies, accelerating the de-dollarization trend and shaking the dollar’s status as the world’s primary reserve currency.

It is not hard to predict that if Warsh becomes Fed Chair and overly follows Trump’s commands, disregarding rules in interest rate regulation, it will undermine the Fed’s independence and international reputation. Losing trust from the global community would be a huge loss for the U.S. and the dollar. Past lessons remind us that when Biden’s government excluded Russia from SWIFT and weaponized the dollar, it increased U.S. sanctions in the short term but long-term weakened the dollar’s international monetary status. Confidence is more important than gold. Adhering to laws and rules, maintaining the Fed’s independence, and ensuring transparency and predictability in monetary policy are key to restoring the Fed’s market credibility.

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