Trump banished Powell as a ‘traitor’, but victory for ‘faithful’ Warsh may be delayed

When President Trump ended the speculation on who he wants as Fed chair, analysts began mulling the implications, especially given the underlying narrative regarding independence, and loyalty or otherwise to the president.   

 Talk of the Fed’s governance over the past year has all the suspicion, allegations, backstabbing, and duplicity of a great season of The Traitors. It’s even seen a banishment. But while TV viewers will get resolution of the treachery in the Scottish castle later this month, investors may need to be patient to see what happens in Washington.  

North Carolina’s Senator Tom Tillis is a member of the Senate Banking Committee and as one of 13 Republicans who will vote, he could hold the balance of power if all 11 Democrats vote against Warsh’s nomination. And on Friday, he made his position clear.

“I will oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman, until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved,” he posted on his X account.

Industry reaction to Warsh

Since the announcement Friday, InvestmentNews has received a lot of reaction to the news that Kevin Warsh is on course to return to the Fed having served on its board from 2006-2011, given his criticism of the institution in the years since.

Jeffrey Roach, Chief Economist for LPL Financial, said that Warsh is a “safe pick.”

“He’s forthright, willing to rethink convention, and not necessarily a yes-man for the President. Last year’s speech is helpful for investors as they anticipate how the policy framework may change under a new chair,” he recalled. “Channeling his inner Richard Fisher and Andy Haldane, Kevin Warsh argued for “setting aside Central Bank fast food.” (Fisher and Haldane were infamous for using quirky titles to make a point.)

Richard Clarida, PIMCO’s Global Economic Advisor and a former Federal Reserve Vice Chairman, said that communication policy may be the biggest difference under Warsh compared to the Powell, Yellen, and Bernanke eras.

“Warsh, based on his writings since leaving the Fed, may be much less likely to rely on extensive forward guidance about the future path of interest rates, especially during “normal” times – as is the case today – when interest rates are not pinned at the zero bound,” he said.

Charlie Ripley, Senior Investment Strategist for Allianz Investment Management, also flagged the potential of monetary policy change and the Fed’s mandate.

“Warsh, while having experience as a former Fed governor, he is known as an inflation hawk, but his return is expected to brings a more nuanced approach to the Fed’s leadership,” Ripley said. “The likelihood of potentially steering the committee towards a more expansionary policy is a risk in the short term. Continued criticism around Fed independence remains a hurdle as President Trump and his advisors have publicly favored candidates advocating for lower interest rates.”

Dan Siluk, Head of Global Short Duration & Liquidity and Portfolio Manager at Janus Henderson, noted that Warsh appears prepared to reshape the mechanics of policy while preserving the Fed’s long‑term independence.

“Kevin Warsh brings an unusual combination of hawkish instincts, openness to innovation, and deep respect for Fed independence,” he said. “His nomination suggests a policy regime that is more flexible on rates, more disciplined on the balance sheet, less communicative in its forward signaling, and influenced by a structural productivity narrative shaped by AI. Markets should prepare for a Fed that is simultaneously more unpredictable and more orthodox, a blend that marks a genuine shift in the post‑crisis monetary landscape.”