US president Donald Trump has announced Kevin Warsh (pictured) as his pick to replace Jerome Powell as the next chair of the Federal Reserve.

Warsh, who previously served as a Fed governor between 2006 to 2011, is expected to take over the role in May if approved by the Senate.

Warsh’s appointment came as a surprise, with prediction markets pegging Rick Rieder and Christopher Waller as favourites for the job before Friday’s announcement.

Hawk-turned-dove?

Warsh has a hawkish reputation, due to his criticism of quantitative easing and its impact on inflation during his time on the Fed Board. However, he has recently advocated for interest rate cuts, which Trump has been vocal in pushing for.

Christian Hoffmann, head of fixed income at Thornburg Investment Management, said the nomination marks a “genuine inflection point” for monetary policy.

“The Fed is simultaneously caught between the two sides of its dual mandate, facing increasing political pressure and questions about its future independence. 

“Warsh is hardly an unknown quantity. Markets remember him as a crisis-era governor with strong views on the institution’s direction, and his return will help define the next phase of US rate policy, balance sheet strategy, and central bank communication.”

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Markets currently price two Fed cuts in 2026, weighted towards later in the year.

Under Warsh, however, Hoffman sees higher uncertainty around this path, with a greater likelihood of further cuts.

According to Seema Shah, chief global strategist at Principal Asset Management, the nomination reinforces the likelihood of policy continuity and institutional credibility.

“Warsh is a traditional, orthodox policymaker with deep experience inside the Federal Reserve system,” she said.

“His credibility and institutional knowledge should ultimately anchor expectations rather than unsettle them. Crucially, his background suggests a strong respect for Federal Reserve independence.

“That makes him far less susceptible to political pressure for aggressive rate cuts when inflation dynamics do not warrant it—even in an environment where the administration may favour looser financial conditions.”

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“Trump may see Warsh’s prior criticisms of the Fed as an asset,” added Evelyn Partners chief investment strategist Daniel Casali.

“Appointing someone with hawkish credentials provides political cover while still enabling a tilt toward policies that support growth and, by extension, his administration’s objectives. The incoming 2026 FOMC composition reinforces this direction.

“The next rotation of regional Fed presidents is expected to lean more dovish, increasing the likelihood that even a moderately dovish chair could steer the Committee towards rate cuts,” he added.

“This broader dovish bias aligns neatly with Trump’s long‑standing dislike of a strong US dollar. Trump has often suggested that a softer US dollar could benefit US exporters by increasing competitiveness; a more dovish Fed would naturally complement that objective.”