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 global financial markets.
On March 4, the White House officially submitted Kevin Warsh’s nomination as 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 lingering inflation 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 fiscal policy during wartime 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, massively cutting taxes 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 markets,” 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, creating a relatively loose monetary policy environment, and helping 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, 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 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 role. Warsh, aged 56, energetic, open-minded, supportive of innovation and cryptocurrencies, previously left the Fed due to opposition to quantitative easing and advocating monetary tightening. This “hawkish” stance benefits Trump by increasing the likelihood of Senate approval—because if he pushes for rate cuts after taking office, he won’t be seen as a “political puppet” of Trump, 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 a longtime friend of Trump. 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.
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 changes. If US inflation rises or does not approach the 2% target, the likelihood of Fed rate cuts will be very small, or if cuts occur, they 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 lower interest rates to encourage dollar depreciation and boost exports; conversely, if the deficit shrinks, similar policies might be adopted. Notably, six consecutive rate cuts have caused the dollar index to weaken. In 2025, the dollar depreciated 16% against the euro, 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. Continued aggressive rate cuts by the Fed 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 could damage Fed’s independence and international reputation. Losing global 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 boosted US sanctions in the short term, it weakened the dollar’s international position in the long run. 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.