Episode summary
Instant Reaction: Trump Nominates Warsh for Fed Chair | Bloomberg Daybreak: US Edition
Bloomberg Daybreak: US Edition
· · 9 min
Summary
President Trump’s announcement that he will nominate former Fed Governor Kevin Warsh to succeed Jerome Powell set off an immediate discussion about how hawkish Warsh may be and what that could mean for rates, the dollar, and markets. The host and guests said the pick had been widely expected, but the key question is whether Warsh will align with Trump’s desire for “extremely low interest rates” or stick to a more inflation-fighting stance.
Michael McKe said Warsh’s long relationship with Trump and his recent comments about AI, capital spending, and deregulation helping growth with lower inflation may have made him acceptable to the president. He also argued that markets were reacting to Warsh’s reputation as a hawk, pointing to a firmer dollar, a steeper yield curve, and pressure on equities as the news landed.
The discussion also focused on timing and confirmation risk. Powell’s term ends May 23rd, and the Senate could move quickly, but the host and guests noted unresolved questions around a Justice Department subpoena involving Powell records and whether Senate Republicans will demand that issue be cleared up first. Dan Curtis said markets had largely positioned overnight and were “taking this in stride,” though the dollar and gold were still responding to the news.
Key takeaways
- Michael McKe said Warsh was likely chosen because he has stayed in close contact with Trump and has recently argued that lower inflation can coexist with faster growth.
- The guests said markets viewed Warsh as more hawkish than a typical Trump-rate-cut pick, which helped lift the dollar and steepen the yield curve.
- Dan Curtis said the gold rally lost momentum as the dollar firmed on the nomination news.
- The host and guests said Powell’s term ends May 23rd, leaving time for Senate confirmation but also leaving the Fed transition politically uncertain.
- Tom Keane and Paul Sweeney said Warsh’s temperament and inflation-fighting history could make him a very different kind of Fed chair than Powell.
Notable quotes
“President Trump has announced via his truth social account that he is nominating former Fed Governor Kevin Worsh to succeed Jay Powell as chairman of the Federal Reserve”
“the biggest issue has been whether Worsh would be too hawkish given that the president wants extremely low interest rates”
“Worsh has made some comments recently to the effect that AI and the massive capital spend we've seen and the deregulation of the Trump administration would mean faster growth with lower inflation”
“the bond market is and and the dollar are telling you what the markets think at the moment”
“I'm not sure how that, you know, fits together, but maybe we'll find out uh this morning with an announcement”
How the episode opens
This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world. Breaking news now official.
A red headline crossing the Bloomberg terminal as President Trump has announced via his truth social account that he is nominating former Fed Governor Kevin Worsh to succeed Jay Powell as chairman of the Federal Reserve. when Chairman Powell's term expires in May. And we are joined by Bloomberg international economics and policy correspondent Michael McKe.
Mike, good morning. This was an expected announcement. Our reporting was that the president had settled on Kevin Worsh, but of course this was a figure that the president had passed over the last time around when he nominated Chairman Powell.
Yes. Uh but Worsh has stayed in close contact with the president ever since and of course his uh family. not not him as much, but his family has been big donators to the Republican party.
So Worsh and the president have a relationship. Uh the biggest issue has been whether Worsh would be too hawkish given that the president wants extremely low interest rates. Worsh has made some comments recently to the effect that AI and the massive capital spend we've seen and the deregulation of the Trump administration would mean faster growth with lower inflation.
So that may have made him acceptable as a final choice.
And of course uh we have seen a market reaction uh in the uh uh the the leadup to this official announcement. Stocks falling uh treasury yields rising just a bit. Uh what do you make of that market reaction, Mike?
Well, I think the bond market is and and the dollar are telling you what the markets think at the moment. They're going on the fact that Walsh has been a hawk.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed chair nomination
- interest rates
- white house influence
- senate confirmation
- us monetary policy
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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