#比特币创下近一月内新高 Why did Trump nominate the "hawkish" Warsh to be Federal Reserve Chair?

On January 30, U.S. President Trump announced the nomination of former Federal Reserve Board member Kevin Warsh as the next Federal Reserve Chair. The announcement immediately caused strong market turbulence. This nomination is seen as a signal of significant adjustments to the current monetary policy of the Fed and will have a profound impact on global financial markets.
On March 4, the White House officially submitted Kevin Warsh’s nomination to the Senate. Warsh previously served as a Fed governor during the financial crisis and is now positioned at the forefront of monetary policy amid ongoing U.S. inflation that has yet to fully recede, the high fiscal pressures from the Iran war, and market uncertainties. This personnel choice not only concerns the interest rate path but is also viewed as a key signal of Trump seeking a new balance between wartime fiscal policy and the dollar’s status.
Why does Trump push for Fed rate cuts?
Fiscal policy and monetary policy are the most important macroeconomic management tools. Since re-entering the White House, Trump has implemented loose fiscal policies domestically, significantly cutting taxes through the "Big and Beautiful" Act, permanently lowering corporate income tax to 21%, stimulating corporate investment and increasing employment; externally, he raised tariffs, implemented a "reciprocal tariff" policy to suppress imports, and used new tariffs to offset fiscal deficits, forcing more foreign companies to expand investment in the U.S.
Meanwhile, Trump hopes the Fed will cooperate with his fiscal and tariff policies by sharply lowering the federal funds rate to below 1%, thereby reducing corporate financing costs and directing more funds toward businesses and industrial sectors. With the U.S. midterm elections approaching, Trump is eager to stimulate investment through rate cuts to achieve high employment and low inflation, thereby boosting the Republican Party’s electoral prospects.
Additionally, Trump’s demand for rate cuts aims to ease America’s debt repayment pressures. As of August 2025, the total U.S. national debt reached a record $37 trillion, with debt-to-GDP ratio exceeding 120%, and interest payments alone surpassing U.S. defense spending for the same period. Lowering interest rates benefits the government by enabling it to borrow new debt to pay off old debt and reduce fiscal deficits. However, the Fed’s independence is protected by legislation from Congress. Its monetary policy aims to achieve dual goals of controlling inflation and promoting full employment, with minimal government interference.
Regarding Trump’s repeated calls for "rate cuts to save the market," the Fed has been cautious. Since September 2024, the Fed has cut rates six times in a row—lowering the target range to 3.50%–3.75%—but the current rate level still falls far short of Trump’s expectations.
This has led to multiple disagreements between Trump and the current Fed Chair Powell. Therefore, Trump is seeking a "reliable person" to push for rate cuts, creating a relatively loose monetary policy environment to help 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 Fed Chair. Since August 2025, Trump has been working on selecting his candidate for the next Fed Chair. The final decision to nominate Warsh is mainly based on the following reasons:
First, Warsh shares similar views with Trump. From 2006 to 2025, although Warsh has some differences with Trump on fiscal, trade, and cryptocurrency issues, he emphasizes the role of market mechanisms, opposes excessive government intervention, advocates for pragmatic monetarism and balance sheet reduction to create room for rate cuts, and supports "reciprocal tariffs." These positions are largely aligned with Trump’s policies and ideological stance.
Second, Warsh has the qualifications and capability to serve as Fed Chair. He has an excellent educational background and work experience: undergraduate studies in public policy at Stanford University, a J.D. from Harvard Law School; experience at Morgan Stanley’s M&A department in New York, understanding financial markets; served as Special Assistant to President George W. Bush on economic policy and as Executive Secretary of the White House National Economic Council; also served as a Fed governor, familiar with monetary policy operations, financial regulation, and market psychology, recognized as a "seasoned central banker."
Third, he is more likely to gain Senate approval. The President’s nominee for Fed Chair still needs Senate confirmation for official appointment. Warsh, aged 56, is energetic, open-minded, supports innovation and cryptocurrencies. He previously left the Fed due to opposition to quantitative easing and advocacy for monetary tightening. His hawkish stance favors Trump’s nomination being approved by the Senate—if he pushes for rate cuts after taking office, he is less likely to be seen as a "political puppet" of Trump, which helps maintain the Fed’s independence.
Fourth, his network of contacts is highly credible. Warsh’s father-in-law, Ronald Lauder, is one of the heirs of Estée Lauder and a longtime friend of Trump. This close personal connection makes Warsh trusted by Trump as a "trusted insider."
Future direction of Fed monetary policy
If Warsh successfully gains Senate approval, he will assume the Fed Chair position in June 2026. At that time, he may accelerate rate cuts and implement a more accommodative monetary policy. However, the magnitude and frequency of rate cuts will depend on the U.S. economic performance, especially inflation and employment conditions. Due to the dollar’s long-standing dominance as the world’s reserve currency, the Fed also wields supra-sovereign influence.
The Fed’s monetary policy not only regulates the U.S. economy but also quickly influences global asset pricing and capital flows through interest rates, exchange rates, and expectations, exerting significant impact and shocks on economies and financial markets worldwide. Both developed and emerging markets are inevitably affected by changes in Fed policy.
This year’s first-half U.S. inflation and employment data will be key indicators for future Fed policy shifts. If inflation rises or does not converge toward the 2% target, the likelihood of rate cuts will be small, or if cuts occur, they will be limited. If corporate layoffs worsen and employment weakens, the probability of rate cuts will increase.
Trade balance is another important factor. If the trade deficit continues to widen, the Fed may be motivated to cut rates to weaken the dollar and encourage exports; conversely, if the trade deficit narrows, the opposite may happen. Notably, six consecutive rate cuts have already caused the dollar index to decline. In 2025, the dollar depreciated 16% against the euro, gold broke through $5,500 per ounce, reaching a historic high. Rate cuts will undoubtedly reinforce dollar depreciation expectations and further weaken the appeal of dollar assets. According to IMF data, in 2025, the dollar’s share of global foreign exchange reserves fell to 56.92%, a new low since 1995. If the Fed continues to cut rates sharply, it will likely drive more capital into non-dollar currencies, accelerating the de-dollarization trend and shaking the dollar’s status as the world’s primary reserve currency.
It is not hard to predict that if Warsh becomes Fed Chair and overly follows Trump’s commands, disregarding rules in interest rate regulation, it will undermine the Fed’s independence and international reputation. Losing trust from the global community would be a huge loss for the U.S. and the dollar. Past lessons remind us that when Biden’s government excluded Russia from SWIFT and weaponized the dollar, it increased U.S. sanctions in the short term but long-term weakened the dollar’s international monetary status. Confidence is more important than gold. Adhering to laws and rules, maintaining the Fed’s independence, and ensuring transparency and predictability in monetary policy are key to restoring the Fed’s market credibility.