It’s official: President Trump has selected the most competent and experienced candidate for a crucial job, irrespective of superficial appearance, family background and political affiliations. Sorry, what’s that?

Oh.

“Central casting” aspects aside, we were interested in what Wall Street’s analysts make of Warsh, whose views on monetary policy seem to have mutated from generic-hard-money to something a bit squishier, and, frankly, a little incoherent.

On the assumption that some of you might be interested in the same, we’ve started collecting an assortment of views that have landed in Alphaville’s inbox since the news leaked out.

The main takeaway so far is that most analysts think he’s a credible Fed chair but are a little sceptical of Warsh’s hawkish credentials, think he will try to bend the Fed to Trump’s will (albeit not to the extent that some of the other candidates might have), and are a bit confused as to what he might seek to do with the central bank’s balance sheet.

Krishna Guha — Evercore ISI:

The market is trading Warsh hawkish with rates higher, yield curve steeper, stock futures lower, and dollar higher in overnight trading – in line with our note previewing the initial response Thursday.

The Warsh pick should help stabilize the dollar some and reduce (though not eliminate) the asymmetric risk of deep extended dollar weakness by challenging debasement trades – which is also why gold and silver are sharply lower.

But, we advise against overdoing the Warsh hawkish trade across asset markets – and even see some risk of a whipsaw. We see Warsh as a pragmatist not an ideological hawk in the tradition of the independent conservative central banker.

We think Warsh will be firmly dovish in 26 on a strong form version of our “stronger not hotter” thesis in which growth outperforms on strong productivity but underlying inflation remains benign.

Because he has a hawkish reputation and is seen as independent, he is better placed to bring the FOMC along with him to deliver at least two and plausibly three cuts this year than some rivals.

The questions are more around 27/28 when Warsh will expect to remain firmly dovish on high productivity but would revert hawkish if productivity disappoints and inflation mounts, particularly if driven by excessively easy fiscal policy.

Warsh is a longstanding balance sheet hawk, which favors (real) yield curve steepening. But here too we think he will be more pragmatic than many expect.

We think he will promise no abrupt changes to Fed balance sheet policy and a Fed-Treasury accord to provide a framework for closer cooperation. The market will read this as giving Treasury Secretary Bessent a soft veto on any QT plans and Warsh will be happy with that.

Stephen Jen — Eurizon SLJ:

The huge Fed balance sheet has quietly eroded the Fed’s independence, because buying domestic government bonds (which all G7 countries have done) has set a glaring precedent that the central bank can monetise debt outside of a war or a financial crisis. 

This has not only created the moral hazard of governments no longer fearing bond vigilantes but also fostered the expectation that when push comes to shove in the bond markets, the government can always call on the Fed to do what is necessary to push yields lower. 

Warsh was among the first wave of soldiers charging the hill, without fear for his professional safety.  As the next Fed Chair, I expect him to not accept the status quo at the Fed and to bring fundamental changes to the Fed’s frameworks and the Alt-Keynesian mindset.  The use of excessive force by the Fed will probably be behind us, and the Fed could strike a better balance of prudence and restraint, I’m guessing.

Citi:

USD and US yields spiked overnight, as Warsh is seen to have a steeper curve impact given he favors a reduced usage of the Fed balance sheet. His historically hawkish bias and his more credible background as former Fed Governor has driven an unwind in debasement trades. We wouldn’t be surprised of “sell the news” type price action, though moves had already stalled at technical levels.

Note that Trump’s nomination still needs to be confirmed by the US Senate, and Republican senator Thom Tillis has said he will block any Fed chair nominee until the investigation into Jerome Powell is completed.

Dario Perkins — TS Lombard:

My 9-year old likes to make air quotes when being sarcastic. You know, dad is “really good” at football, and dad is a “world famous” economist. (Yep, she mostly uses the sarcasm and air quotes to poke fun at me). But on hearing the news that Trump is going to appoint Kevin Warsh as Fed chair, and seeing the response from markets and on social media, I can’t help deploying by daughter’s signature response:  Yeah, sure, Kevin Warsh is a “hawk”. Come on, if that were true, he wouldn’t get the job.

Kevin Warsh’s standing as a “hawk” comes from his time at the Fed in early 2010s. He REALLY hated QE, he repeatedly voiced his objections during FOMC meetings, and he eventually quit the FOMC because he couldn’t live with what the central bank was doing. Why? He didn’t like the way it “distorted” markets, or widened inequality, and he feared it would inevitably bring debasement and uncontrollable inflation. Naturally, he earned a reputation as a “hard money” central-bank traditionalist. 

. . . Warsh seems more of an opportunist than a hawk. Perhaps he thought politics was moving in a certain direction in 2010. In any case, today he is nothing like a hawk. Sure, he still hates QE but he is also a firm believer in the productivity fairy. I’ve watched him many times over the past 12 months, and he has repeatedly said he doesn’t believe in “data dependence”. He doesn’t care if inflation is sticky in the short term, because he “just knows” a big deflationary productivity boom is coming. 

To understand this nomination, see Bessent’s selection criteria for Fed chair. He said they were looking for: 1) gravitas, 2) An ability to persuade the rest of the FOMC to go along with a view, and 3) someone who would do what Greenspan did in the 90s, and cut rates to accommodate a productivity boom. Warsh is clearly a better fit than Hassett, precisely because of his hawkish reputation. Whereas Hassett was a path to dissent and paralysis, Warsh has a better chance of pulling the FOMC along.

. . . Is Warsh going to shrink the Fed’s balance sheet? I’ve heard Mr Anti QE talk about this many times, and his views are intellectually intractable. He says shrinking the balance sheet will reduce interest rates and “crowd in the private sector”. But wasn’t QE supposed to SUPRESS long-term rates? The only way I can make sense of Warsh’s thinking is that he is implicitly calling for a big fiscal contraction. Well GLWT, because this administration has shown no inclination to cut the deficit.

Ajay Rajadhyaksha — Barclays:

President Trump nominated Kevin Warsh as the new Fed Chair, and the questions started coming in thick and fast. What does this mean for the fed funds rate? For the balance sheet? Will the dot-plot and SEPs be dropped? Are there big changes coming?

And the short answer is … not really. At least not for 2026.

Markets agree. At the time of writing, the December FF contract is pricing in 3-4bp more in rate cuts than at yesterday’s close. That is over the next seven Fed meetings. At the start of the year, the same contract was pricing in 60bp of cuts. Collectively, the market is saying that there will not be much of a change in the fed funds path because of this nomination.

We think this makes total sense. In our view, all three reported finalists for the Fed chair (Warsh, Waller, Rieder) would have been credible to markets. None of them is in the category of Fed voters who would try to push the policy rate to levels clearly not justified by the economic situation.

That includes the Fed Chair-designate. In his past stint as a Fed governor, he earned the reputation of both understanding financial markets (more than the average FOMC voter) and being a bit of a policy hawk. His tone on policy has clearly moderated in the past few years.

But even in recent speeches, such as the one at the IMF last April, Warsh suggested a trade-off between a lower fed funds rate and a smaller Fed balance sheet: “If the printing press could be quiet, we could have lower policy rates.” That does not strike us as someone who is ultra-dovish, despite Trump’s preference for much easier policy.

On the other hand, Warsh is clearly not willing to give up on the “full employment” mandate in the quest for a perfect inflation profile. He argued last year that “there is no ‘cruel choice’ between the Fed’s two objectives of stable prices and full employment … we don’t have to push the unemployment rate up to get the inflation rate to fall … we need to throw people out of work to get the inflation rate to come down, which is nonsense.”

This language could have come from any Fed chair in the recent past – it is very much in the mainstream of Fed thinking. Consider that the current Fed has now missed its 2% inflation target for almost four straight years and still started a (slow) easing cycle as the jobless rate started to drift higher. These views seem to be policy orthodoxy, not heresy.

And then there is the matter of the FOMC itself. The Fed Chair is a very important role, sure. He or she is the public face of the FOMC, markets hang onto every word at a Fed press conference, the Chair is critical in building consensus and setting the agenda and the tone, etc. But ultimately, the Chair is still one vote.

The rest of the FOMC, we feel very confident, would not go along with policy rates being pushed down to levels with which they simply disagree. Absent a financial crisis, the Eccles building moves incrementally. We do not see that changing under a Chair Warsh.

Ian Lyngen — BMO Capital Markets:

By selecting Warsh, the Administration has clearly offered a nod to the necessity of Fed credibility. Warsh’s experience at the Fed and his credibility as a central banker will surely contribute to his ability to build consensus on the FOMC and be influential in the overall direction of monetary policy. We’re reminded that there are 12 votes, and the Chair only gets 1. Of course, the Chair is instrumental in steering the Committee’s conversation and consensus building.

All of this begs the question, does the President truly believe that Warsh is going to come to his first meeting as Chair on June 17 and convince the Committee to cut rates 25 bp (or even 50 bp) if there isn’t the economic data to justify such a move? It’s unclear how the Administration sees this playing out, but from the market’s perspective, there is only a total of 20 bp of cuts priced in between now and the June decision.

We’ll argue this is more a reflection of the probability that the data dictates lower policy rates as opposed to any influence Trump is attempting to exert. It goes without saying that there is surely some degree of loyalty that Warsh will have toward the President, although we’re reminded that Trump nominated Powell as well. On net, while it might not be a good day for duration, it’s a solid showing for Fed independence.

Brian Jacobsen — Annex Wealth Management:

President Trump nominated Kevin Warsh to become the next chair of the Fed. Warsh served on the Fed’s Board of Governors from 2006 through 2011, so he has experience.

He has advocated watching inflation like a hawk, slimming down the Fed’s balance sheet, and having looser bank regulations. Not all of those align with the idea that he’s a dovish pick who wants to aggressively lower rates. He has said that money for Wall Street is loose while money for Main Street is too tight. He may advocate for lower rates at the same as he pushes for more quantitative tightening (a smaller Fed balance sheet).

Instead of falling neatly along the hawk-dove spectrum, we may have to wait and see exactly what type of monetary policy species he is. Like any good policymaker, he may change his views as the facts and circumstances change.

Wells Fargo:

We think it is highly unlikely that the Fed will shrink its balance sheet materially under Chair Warsh given how entrenched the “ample reserve” operating framework is in the financial system. Stated differently, there are no reasonably plausible scenarios where the financial system would comfortably absorb a sharp change to this stance, no matter what the leaning of the new Fed chair may be. There is a high hurdle to altering this framework.

[…]

Warsh has some challenges that start almost right away. First, does he act as a shadow Fed chair? If he is going to second guess Powell at every turn or forcibly disagree with him, he may appease his new boss, but he runs the risk of alienating himself to the rest of the Committee. We think Warsh knows this and will tread carefully around that, but it’s a risk. And second, what kind of consensus builder will he be? Criticize Powell as much as you like (and yes, we have been critical of him at times), but he is one heck of a consensus builder, carefully crafting and selling his message to members ahead of meetings. This will be critical for Warsh. The expectation is he wants to cut, perhaps even more aggressively than market pricing. If that is indeed the case, he has his work cut out for him in building a consensus toward that when the expectation of the Committee at large is just for one more cut per the dots (where we think the hurdle is growing higher even for that).

TD Securities:

Markets may struggle to pin down Warsh’s view given his notable shift in policy priorities after espousing a very hawkish stance over the last decade. Warsh will likely be a proponent of rate cuts in 2026, but the main question is whether his former hawkish persona makes a comeback down the road.

Chris Rupkey — fwd: Bonds:

Markets can throw everything they think they know about Kevin Warsh based on interviews and his own newspaper opinion pieces out the window because slowly but surely he will lean in the President’s direction which favors dramatic interest rate cuts of at least one or two percentage points below 3% neutral.

Savers beware. It won’t be franks and beans this year, it will be just beans on the table. Warsh wouldn’t have gotten the job unless he had given the President his word that he would follow the Trump 2.0 economic agenda. Markets are focused on interest rates mostly, but we are more worried about governance issues and how Warsh will run things from now on.

The changes in how the Fed operates from monetary policy to regulation could be more dramatic than investors realize. Fed 2.0 will be a very different place if Warsh is confirmed. We hope it is in a good way.

Rogier Quaedvlieg — ABN Amro

… Warsh has been quoted as saying the Fed needs ‘regime change’ which would involve ‘breaking some heads.’ This will not make him popular in the FOMC in the short run, and limits his soft power. What might that regime change look like? Based on a 2025 speech to the G30, we think it would involve less public speaking by Fed officials, less data dependence, and a tighter focus on interest rate setting. The overall message of the speech was one of distrust of models and data, calling forecasting a ‘distracting Fed preoccupation’ and warning that publishing your forecasts might lock you into a narrative. He has also been critical of forward guidance. We should therefore expect a little less clarity and guidance on the future monetary policy outlook. This could lead to more rate volatility and potentially higher term premia.

Taking a step back, whilst critical of the Fed’s functioning, Warsh seems a relatively benign pick on the Fed independence front. He is not clearly in camp Trump, and despite having a different view on monetary policy compared to the consensus of the FOMC over the past years, we don’t see this nomination as a further attack on the Fed’s independence. It remains important to realize that interest rates are set by a majority vote of a 12-member Committee, and the Chair’s power to influence consensus has limits. Until then, confirmation of Warsh may take some time, with Senator Thom Tillis, a member of the banking committee, saying that he will block any nominee until the subpoenas for current chair Powell have been resolved.