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President Donald Trump’s expected nomination of the next chair of the U.S. Federal Reserve is set to clarify the direction of American monetary policy and remove months of uncertainty that has weighed on global markets.
Trump said that he would announce his choice on Friday, with investors and economists closely watching for confirmation that former Federal Reserve Governor Kevin Warsh will get the role. Bloomberg News reported that Warsh is the leading candidate, while a source familiar with the matter told Reuters that Warsh met with Trump at the White House on Thursday.
If confirmed, Warsh would replace Jerome Powell when his term as Fed chair ends in May.
Financial markets moved sharply during Asian trading hours as expectations solidified around Warsh’s potential nomination. The U.S. dollar strengthened and long term Treasury yields rose, reflecting investor bets that the next Fed leadership could take a firmer stance on inflation and balance sheet management.
At the same time, assets that tend to benefit from looser monetary conditions declined. Gold fell about three percent, bitcoin slipped roughly two percent, and U.S. stock futures traded lower by about half a percent.
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Interest rate futures markets continued to price in two U.S. rate cuts later this year, assuming the new Fed chair takes office in the second half of the year.
Market participants describe Warsh as one of the more cautious options among the candidates considered for the job. While investors expect him to support interest rate cuts if inflation allows, they also believe he would push to reduce the size of the Fed’s balance sheet.
Sonu Varghese, global macro strategist at Carson Group in Chicago, said the nomination could slightly alter the policy outlook.
“If the nominee is indeed Warsh, we could actually end up with a Fed that tilts hawkish at the margin,” Varghese said.
Warsh previously served as a Fed governor from 2006 to 2011 and has argued publicly for what he has called a regime change at the central bank, including tighter control over its asset holdings.
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Trump has repeatedly criticized the Federal Reserve for not cutting interest rates aggressively enough and has referred to Powell as “Too Late” for resisting faster easing. The president has argued that borrowing costs should fall sharply to support economic growth.
That pressure has raised concerns among economists and lawmakers about the independence of the central bank, which is widely seen as critical to controlling inflation and maintaining financial stability.
Analysts say Trump’s nominee will be closely examined for his ability to conduct monetary policy without yielding to political demands.
Other names previously under consideration included current Fed Governor Christopher Waller and BlackRock executive Rick Rieder. White House economic adviser Kevin Hassett was once viewed as a front runner, but Trump later said he preferred to keep Hassett in his current role.
The formal announcement, expected Friday, will conclude months of speculation and set the stage for Senate confirmation hearings that are likely to focus heavily on inflation, interest rates, and the Fed’s independence.
