Unlock the White House Watch newsletter for free

Your guide to what Trump’s second term means for Washington, business and the world

Donald Trump is preparing to nominate former Federal Reserve governor Kevin Warsh to replace Jay Powell as the chair of the world’s most important central bank, according to three people familiar with the matter.

The president said at a Kennedy Center event in Washington on Thursday evening that he would announce his candidate to head the US central bank “tomorrow morning”.

“A lot of people think that this is somebody that could have been there a few years ago,” the president said. “It’s going to be somebody that is very respected, somebody that’s known to everybody in the financial world.”

Warsh interviewed for the job in 2017 when it eventually went to Powell, whose term as chair expires in May.

The former Fed governor — who was the youngest ever in the role when he joined the central bank in 2006 — is known for his connections on Wall Street and in Washington policymaking circles.

While he has a long-standing relationship with the president, some viewed his hawkishness during his time at the Fed as a big obstacle to winning Trump’s trust.

Warsh’s odds on prediction market Polymarket surged to 95 per cent on Thursday evening after Trump’s remarks.

Rick Rieder, the BlackRock executive who was widely seen as Warsh’s chief rival to secure Trump’s nomination, fell to just 3 per cent.

Fed governor Christopher Waller and White House economist Kevin Hassett are also finalists for the position.

Trump’s decision would end one of the most contentious races for the top job in recent memory. It comes at a time when he has relentlessly criticised Powell for not bowing to his demands to cut interest rates, with the president referring to him earlier on Thursday as a “moron” who was hurting the US’s economic prospects.

Trump, who has on several occasions claimed an announcement was imminent, earlier on Thursday said he expected to name his pick next week. Betting markets have favoured different candidates in recent weeks, reflecting the president’s apparent shifts between possible nominees.

Powell has repeatedly faced Trump’s ire over his reluctance to slash interest rates. The Fed held borrowing costs at a 3.5 per cent to 3.75 per cent range on Wednesday, following three quarter-point cuts last year.

Trump posted on Truth Social earlier on Thursday that Powell had “absolutely no reason” to keep interest rates high.

“We should have a substantially lower rate now that even this moron admits inflation is no longer a problem or threat,” the president said. “He is costing America Hundreds of Billions of Dollar a year in totally unnecessary and uncalled for INTEREST EXPENSE.”

Trump, who wants borrowing costs to fall to about 1 per cent, has said any candidate who gets the job must be willing to slash rates.

Trump’s repeated attacks on the Fed have raised alarm in financial markets about the independence of the central bank.

The odds for Hassett, a close ally of the president, collapsed after pushback from senators over the White House launching a criminal investigation of Powell’s testimony to Congress about a renovation of the Fed’s headquarters that is $700mn over budget.

Powell said the Department of Justice’s decision to serve him with grand jury subpoenas was “a pretext” aimed at pressing the central bank into making more rate cuts. The Fed has defended his testimony.

Some Republican senators, led by North Carolina’s Thom Tillis, threatened to block Trump’s pick — who needs to be confirmed by a Senate majority — unless the probe was dropped.