Donald Trump has revealed his pick to become the world’s most powerful central banker, declaring Kevin Warsh “may be the best” ever.
Mr Warsh, a former member of the Federal Reserve’s board of governors, will “never let you down” as chair of the country’s central bank, the president said in a Truth Social post.
It ends months of speculation on whether he would choose a puppet to force through US interest rate cuts.
Rumours around his potential appointment played out on financial markets overnight and contributed to a strengthening of the Trump-hit dollar and downwards shifts in many dollar-priced commodities such as gold and oil.
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Mr Warsh is widely seen as a cautious advocate of interest rate cuts.
They are being demanded by the president to boost economic growth.
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He has also spoken of the need to shrink the Fed’s balance sheet – a policy that is generally supportive of higher interest rates, helping to balance his possible approach.
He has, however, spoken of the need to loosen post-financial crisis regulations on banks.
The market reaction suggests that Mr Trump’s pick is not seen as the champion for interest rate cuts that investors had feared, potentially eroding some concerns about the independence of the Federal Reserve.
“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best”, Mr Trump wrote.
“On top of everything else, he is ‘central casting, and he will never let you down.”
The appointment is important globally because the fate of the world’s largest economy has ramifications for everything in the financial system.
The central bank is a crucial balancing tool – especially in an era of high uncertainty, and most of that emanates from the United States itself.
A new Fed chair is needed because the incumbent is due to stand down in May after two terms.
President Trump appointed Jap Powell during his first stint in the White House, but he has long criticised the Fed under Mr Powell’s leadership and threatened to fire him on many occasions.
Mr Powell is currently the subject of a Department of Justice investigation into Fed renovation costs – an inquiry he has dismissed as being part of the Trump administration’s efforts to influence decisions by securing a voting majority on its rate-setting panel.
The political row has seen both Democrats and Republicans on the Senate’s influential banking committee come out in support of Mr Powell.
It is the same committee that is now tasked with saying yea or nay to Mr Warsh’s appointment.
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Nick Kennedy, currency strategist at Lloyds Banking Group, said: “Warsh is my preferred candidate but it didn’t look promising for a while.
“From a policy perspective, his track record is more on the hawkish side [more cautious over rate cuts] and he is academically aligned with the administration on wanting a smaller balance sheet.
“In the interview process you have to be aligned with what Trump wants on policy rates. I don’t think this is a role you would want to step into if you were in conflict with that.
“So, that idea that this is good for the dollar is going to be short-lived,” he concluded.
