The upcoming 47th president of the United States, Donald John Trump, is already planning his economic dream team, and it seems like Federal Reserve Chair Jerome Powell may not be a part of it. Reports suggest that Trump is considering replacing Powell when his term ends in 2026, with Kevin Warsh at the top of his list.
Warsh, a former Fed governor and prominent figure on Wall Street, recently met with Trump at Mar-a-Lago. Sources reveal that the plan is to initially appoint Warsh as Treasury Secretary before transitioning him into the top position at the Federal Reserve.
While the final decision is yet to be made, Warsh is a strong contender for the role. Other individuals being considered for high-level economic positions include Marc Rowan, CEO of Apollo Global Management, and hedge fund manager Scott Bessent.
One potential scenario involves Bessent leading the National Economic Council before assuming the role of Treasury Secretary, paving the way for Warsh to step into Powell’s shoes at the Fed.
It’s clear that Trump and Powell have had a tumultuous relationship. Initially nominated by Trump in 2018, Powell’s refusal to comply with Trump’s demands for aggressive rate cuts led to public clashes between the two. Trump’s current economic plans, which include tax cuts, infrastructure spending, and tougher trade tariffs, require a Fed chair who is willing to adjust rates quickly in response to economic conditions – a quality that Powell may not possess.
Economists warn that if Powell remains in his position, further conflicts with Trump are inevitable. With inflation on the rise and limited options for controlling it, Powell faces the challenge of navigating Trump’s expansionary fiscal policies while maintaining stability in the economy.
Kevin Warsh, Trump’s favored candidate for the Fed chair position, is known for his market expertise and alignment with Trump’s economic priorities of lower interest rates and reduced regulation. If appointed, Warsh is likely to shift the Fed’s focus towards stimulating growth, potentially allowing inflation to rise.
The uncertainty surrounding Trump’s economic plans and the potential changes at the Federal Reserve have already impacted Wall Street. Traders are adjusting their expectations for interest rate cuts, with futures markets reflecting increased volatility and nervousness about the Fed’s next moves.
As tensions between the White House and the Fed continue to escalate, the stakes remain high for both parties. Trump’s economic agenda relies on the Fed’s cooperation, while the Fed must find a balance between promoting growth and controlling inflation. The coming months are sure to be crucial as these dynamics play out.