US President Donald Trump announced on Friday that he is nominating Kevin Warsh to be the next chairman of the Federal Reserve, stocks and bonds reacted with a decline after Trump announced the nomination of an "inflation hawk" for the position, CNN reports, writes UNN.
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"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," Trump wrote on his social media on Friday morning. "I have known Kevin for a long time and have no doubt that he will go down in history as one of the greatest Fed chairmen, perhaps the best. Moreover, he is a 'central figure' and will never let us down."
Warsh, the publication writes, is a rather traditional candidate for the position of Fed chairman: a former member of the Fed's Board of Governors, whose candidacy was previously considered for the position of Treasury Secretary for Trump's second term, and he was also a candidate for the top position at the Fed during Trump's first term. Warsh was appointed to the Fed in 2006 at the age of 35, making him the youngest person ever to serve on the influential Fed board.
Warsh, now 55, has recently changed his stance on monetary policy. A politician previously called an "inflation hawk," Warsh now advocates for lower interest rates, according to numerous public statements he has made in recent months as Trump launched a "reality show" about his decision on the Fed chairman, the publication writes. He has also called for reform of the US central bank's staff.
"It's entirely reasonable to assume that he told the president he favors lower interest rates today, otherwise he wouldn't have been nominated," wrote Samuel Tombs, chief US economist at Pantheon Macroeconomics, in a commentary published Friday. "Our instincts tell us that Mr. Warsh will be more concerned with how history views his track record than with continuing to please the president."
The choice of a new Fed chairman is one of the most important appointments for any US president, but under this president, this appointment takes on even greater significance. Trump has promised to lower the cost of living, and the Fed is responsible for maintaining price stability, the publication notes.
Warsh will replace Jerome Powell, whose term expires in May. Senate approval is required for the nomination.
US stock futures fell slightly after Trump announced Warsh's nomination for Fed chairman.
Although Warsh has recently supported Trump's demands for lower interest rates, he deservedly has a reputation as an "inflation hawk" — meaning he typically leans towards raising rates to prevent uncontrolled price growth, the publication writes.
Markets, the publication notes, did not react significantly to Warsh's appointment, but they do not believe that the new Fed chairman will follow the president's instructions and begin lowering rates after taking office in the spring.
Dow Jones Industrial Average futures fell 130 points, or 0.3%. S&P 500 futures fell 0.4%. And Nasdaq Composite technology index futures fell 0.5%.
Stocks generally rise when interest rates fall, as this reduces companies' borrowing costs and increases their profits. They typically fall when rates rise, as higher interest rates reduce corporate profits.
The US dollar reversed course and strengthened 0.1% against other major currencies after a steady decline throughout January. Treasury bond yields rose slightly as investors sold off bonds.
Treasury bonds generally follow Fed interest rates, so higher rates will contribute to higher bond yields. The move was not sharp, but the yield on benchmark 10-year bonds rose 0.01 percentage point to 4.25%, the publication writes.
Trump's announcement concludes an extensive search that began in September, led by US Treasury Secretary Scott Bessent, who narrowed a list of half a dozen candidates and presented four finalists to the president.
Trump has criticized Powell for months for not lowering interest rates faster. Earlier this month, his administration also launched a criminal investigation into Powell and the Fed, prompting Powell to issue an extraordinary condemnation of Trump's attempts to politicize the independent central bank.