UPDATE 6-Trump taps ex-Fed insider Warsh to lead world's top central bank

President Donald Trump on Friday chose former Federal Reserve Governor Kevin Warsh to head the U.S. central bank when Jerome Powell's leadership term ends in May, giving a frequent Fed critic a chance ‌to put his idea of monetary policy "regime change" into practice just as the White House pushes for more control over the setting of interest rates.

President Donald Trump on Friday chose former Federal Reserve Governor Kevin Warsh to head the U.S. central bank when Jerome Powell's leadership term ends in May, giving a frequent Fed critic a chance ‌to put his idea of monetary policy "regime change" into practice just as the White House pushes for more control over the setting of interest rates. Warsh, should he survive a possibly contentious confirmation process in the Senate, is set to take the helm of the world's most important central bank, an institution that determines the cost of credit for the U.S. and beyond and which has been in Trump's crosshairs since his return to the White House last year. "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," Trump said in a social media post announcing his latest move to put his stamp on a Fed he persistently criticizes for not caving to his demands for deep reductions in borrowing costs.

Trump repeated his "central casting" quip in an Oval Office event later on Friday, and a source close to Warsh said the 55-year-old's appearance was a factor in Trump's decision to pick him from a field of four finalists. Trump thinks Warsh looks like a central banker, the source said, ​and has told Warsh on more than one occasion, "You're a good-looking guy." The decision also followed a lobbying campaign by Warsh allies, including his father-in-law and Trump booster Ron Lauder and billionaire investor Stanley Druckenmiller, the source said. "A lot of people weighed in with the president on his behalf."

U.S. stocks were lower on the ‍day after the announcement and in the wake of an inflation report that suggested price pressures could undercut any support for rate cuts among many of the Fed policymakers Warsh will be tasked with leading. The dollar strengthened and Treasury yields were mixed.

NEXT STOP IS SENATE BANKING COMMITTEE The next step in the process is confirmation by a closely divided Senate. The Fed has long been seen as a stabilizing force in global financial markets due in no small part to its perceived independence from politics, and Trump's escalating efforts to test that independence will be a key issue through the approval process. One key Republican on the Senate Banking Committee, which will be the first body to review the nomination, already has repeated an earlier vow not to support any nominee to the Fed as long as Trump's Department of Justice continues ⁠with a criminal ‌probe of Powell that became public earlier this month. "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," Senator Thom Tillis of North Carolina said in a post on X.

Other Republican senators on the panel, however, said Warsh would be good for Fed independence. "No one is better suited to steer the Fed and refocus our central bank on its core statutory ‍mandate," Senator Bill Hagerty said in a social media post, and Senate Banking Committee Chair Tim Scott said he looked forward to a "thoughtful, timely confirmation process." Powell's term as Fed leader ends in May, but Trump's pressure campaign has also opened the door to the possibility that Powell, who called the criminal probe a pretext to pressure the central bank into setting monetary policy ​as the president wishes, may opt to stay on at the Fed as a governor in a bid to safeguard it from political capture. Trump has also tried to force out Fed Governor Lisa Cook in a battle now before the Supreme Court that, if successful, would mark the first time ⁠a president has ever fired a U.S. central bank policymaker. The nomination caps a months-long process that often resembled a public audition as Warsh, White House economic adviser Kevin Hassett and other top contenders - including sitting Fed Governor Christopher Waller and Wall Street insider Rick Rieder - appeared regularly on television to tout their credentials and showcase their thoughts about the economy and U.S. monetary policy.

"He's had a long history of convincing people about his arguments, and so ⁠I think as a result, he's going to be treated with a lot of respect," Fed Governor Stephen Miran, a Trump appointee who has become a leading proponent of the aggressive rate cuts the president has long sought, said on CNBC. "And, you know, I think people are going to find him very persuasive, because at the end of the day, I think a lot of his views are really right." WARSH FAVORS BROAD OVERHAUL OF CENTRAL BANK While Warsh is no White House insider, he has been a confidant of the president and a guest at the president's Florida estate, and looks poised to push many of Trump's priorities as a "shadow" Fed chief ⁠until Powell's tenure in the top job ends in mid-May.

A lawyer and distinguished visiting fellow in economics at Stanford University's Hoover Institution, Warsh has said he believes the president is right to press the Fed for steep rate cuts, and has criticized the central bank for underestimating the inflation-busting potential of productivity growth supercharged by ⁠artificial intelligence. He has also called for a broad overhaul of the central bank that would ‌slim its balance sheet and ease bank regulations.

As a Fed governor from 2006 to 2011, Warsh's familiarity with Wall Street executives and investors made him a chief liaison to the financial community for then-Fed Chair Ben Bernanke during the 2007-2009 financial crisis. It is not clear how Warsh's nomination may affect the trajectory of rates in the short term. The Fed's three rate cuts in 2025 brought its benchmark interest rate to the 3.50%-3.75% range. Earlier this week, citing stronger growth and a ⁠stabilizing labor market, it left rates on hold and signaled a pause ahead; markets for now don't expect another rate cut until June, when Powell's successor is expected to be in place. (Additional reporting by Susan Heavey, Bo Erickson, Michael ‍S. Derby and Andrea Shalal; Editing by Dan Burns, Andrea Ricci, and Paul Simao)

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