Donald Trump's pick to lead the Federal Reserve, set to succeed Jerome Powell in May 2026. His confirmation is virtually certain after the DoJ dropped its case against Powell on April 24th. A former Fed governor who first joined the board in 2006, where he once talked a fellow governor into belting out a musical number at his first meeting. He has limited economics training.
For most of his career Mr Warsh has been an inflation hawk. He has written that "if price stability is squandered, financial stability is put at risk. If financial stability is lost, the economy is imperiled and the social contract is threatened." An analysis of nearly 200 of his speeches, television appearances and papers using an AI model placed him firmly on the hawkish end of the spectrum, with his only doveish episodes coming during serious scares: the global financial crisis of 2007-09, the covid-19 pandemic and the collapse of Silicon Valley Bank in 2023.
Since Trump won a second term, however, Mr Warsh has called repeatedly and forcefully for rate cuts—a shift out of keeping with his younger self. He argues that an imminent productivity boom driven by AI and Trump's deregulatory agenda will squash inflation, and fears high rates could strangle resulting growth. Critics note that even if productivity surges, higher rates are still needed once inflation rears its head—and inflation remains above the Fed's 2% target. Moreover, productivity gains usually drive higher investment, raising the "neutral rate" at which Fed policy is neither easy nor tight.
By April 2026 the case for rate cuts had evaporated. The war in Iran sent oil prices soaring to around $95 a barrel, pushing headline inflation to 3.3% in March 2026. Services inflation, excluding housing, was rising about half a percentage point faster than its average in the 2010s, when the Fed consistently hit its 2% target. Several senior Fed officials publicly laid out their disagreements with Mr Warsh's AI optimism: Philip Jefferson, the vice-chair, said AI may raise inflation in the short term and pull up the neutral rate in the long term; Michael Barr, a Fed governor, made similar points. Jerome Powell told The Economist that with AI, "you're not looking at something that would immediately call for lower rates or that would be lowering inflation."
Some Republican senators had pledged not to confirm any new Fed appointees until the DoJ probe into the Fed's headquarters renovation wraps up. Thom Tillis, a retiring Republican senator, held up Mr Warsh's confirmation until the Department of Justice dropped its case against Jerome Powell on April 24th, clearing Mr Warsh's path to the top job.
In his Senate confirmation hearing Mr Warsh passed the MAGA purity test by refusing to say outright that Trump lost the 2020 election to Joe Biden. He appeared to rule out purging regional Fed branch presidents, saying his call for "regime change" meant "policy regime change".
Mr Warsh has been resolute in identifying the Fed's multitrillion-dollar balance-sheet as the main villain in American monetary policy. He blames quantitative easing for government profligacy, misallocated capital, higher inequality, diminished Fed independence, a more fragile banking system and sagging productivity. He wants to shrink the balance-sheet by offloading bonds, which would push up long-term yields, while offsetting those rises by cutting short-term rates—steepening the yield curve. Getting the balance right would be delicate, not least because reducing reserves too far could repeat, on a bigger scale, the "repo" liquidity crunch of 2019.
Mr Warsh has called for no less than "regime change" at the Fed. Some of his criticisms are considered sensible, such as the notion that central banks should steer clear of politicised terrain like climate change and racial justice—though the Fed has already done this. Others are more contentious: he has accused the Fed of being too reliant on data in general and too wedded to antiquated government statistics in particular, likening reliance on national accounts to "evidence of false precision and analytic complacency". He promotes private data providers and real-time indicators as alternatives—though stockmarkets still surge or sink on official payroll or inflation releases.
One bugbear is rate-setters' reliance on "core" inflation (which excludes only volatile food and fuel prices) over "trimmed-mean" measures (which drop any prices that have risen or sunk the most). Trimmed-mean inflation can be lower than core and so justify lower rates, but most of the time the two are almost indistinguishable.
Mr Warsh is sceptical of "forward guidance"—the practice, standard at the world's central banks since the global financial crisis of 2007-09, of setting out a future path of monetary policy to signal intentions to markets. Forward guidance helps shape long-term borrowing costs, which central banks do not set directly, and reduces market volatility. Mr Warsh frets it does more harm than good by making policymakers dig in their heels and ignore new information. Most Fed-watchers think the trade-off is worth it.
Most relevant Fed decisions require a majority of the seven-member board of governors. Rate-setting decisions need the support of at least seven of the 12 voting members of the FOMC. As chair, Mr Warsh will have the bully pulpit but cast only one vote.
Stephen Miran, a fellow Trump-approved rate-cutter, will vacate his position on the Fed board to make room for Mr Warsh. Jerome Powell said on April 29th 2026 that he would stay on as a governor after handing over the top job—he can stick around until 2028. The three incumbents appointed by Mr Biden are unlikely to go anywhere lest Trump appoint lackeys in their place. Even Trump's two first-term appointees, Christopher Waller and Michelle Bowman, are serious policymakers unlikely to consent to radical change.
Peter Conti-Brown, a Fed historian at the Wharton School of the University of Pennsylvania, has warned that Mr Warsh and those closest to him "are taking way too seriously the false notion that the Fed is in crisis". If Mr Warsh cannot deliver what Trump wants, blaming his colleagues may be a way to keep the president from turning on him—but having both a president and a sitting Fed chair fulminating against monetary policy would be unprecedented.
As a Fed official in 2010, during the European sovereign-debt crisis, Mr Warsh said: "The dollar is the world's reserve currency, bestowing key advantages upon us. But none of this is our birthright. It must be earned, and re-earned. We ought not to be dismissive of the threats to our privileged position in the world." Despite his recent doveish talk, his earlier advocacy for higher rates helped arrest a slide in the dollar when news of his possible appointment emerged.
Only in our dreams are we free. The rest of the time we need wages.