The candidate for the next Chairman of the Federal Reserve has been announced. President Trump has just announced his nomination of former Federal Reserve Governor Kevin Warsh for the position. Born in 1970, Warsh is the youngest among the many hotly tipped candidates for Fed Chair. He graduated from Stanford University and Harvard Law School, earning a bachelor's degree and a Juris Doctor, respectively. He previously served as Vice President and Executive Director in the Mergers & Acquisitions department at Morgan Stanley. Analysis suggests that if Warsh ultimately takes the helm at the Fed, markets could witness significant adjustments to the Fed's policy framework, which would have profound implications for global financial markets and economic prospects. Deutsche Bank indicated that Warsh's policy stance might present a unique combination of "interest rate cuts proceeding alongside balance sheet reduction."

President Trump announced the nomination of former Federal Reserve Governor Kevin Warsh for Fed Chair on the evening of January 30, Beijing time. Public information shows that Warsh possesses a career spanning academia, regulatory agencies, and the investment world, giving him a very deep understanding of financial markets and monetary policy. Trained as a lawyer, Warsh has extensive experience in both the public and private sectors. On the public side, he served as a Governor of the Federal Reserve Board from 2006 to 2011, a period during which the Fed was grappling with the global financial crisis, and he played a crucial liaison role between the Fed and the markets. Currently, Warsh is also a partner at the Duquesne Family Office of Stan Druckenmiller, a Distinguished Visiting Fellow at the Hoover Institution, and a lecturer at the Stanford Graduate School of Business.

In a previous interview, Warsh did not shy away from pointing out the deep-seated problems within the current Federal Reserve system and posited an argument: "Inflation is a choice." He dismissed excuses that blame inflation on supply chains or geopolitics, insisting that central banks have full capacity to determine the price level, and the current situation is a direct result of mistaken choices by the Fed. He pointed out that after the "Great Moderation" period, the Fed mistakenly believed inflation was dead, leading it to maintain an excessively large balance sheet during non-crisis times. Warsh stated, "When you keep printing a trillion here and a trillion there, problems will eventually come knocking." He believes the Fed's failure to withdraw in time during the stable period from 2010 to 2020 meant that when a real crisis (like the pandemic) hit, it had to cross more red lines, resulting in the current inflationary consequences.

In the eyes of Wall Street, Warsh is not just a critic but a reformer. In previous speeches, he outlined a specific policy path: "If we were a little quieter on the printing press, our interest rates could actually be lower." Analysis notes this is a crucial piece of incremental information – Warsh might lean towards using balance sheet reduction (Quantitative Tightening) to control inflation, thereby creating room for lowering nominal interest rates. This logic aligns with Trump's desire to reduce borrowing costs. Deutsche Bank pointed out that Warsh's policy stance might present a unique combination of "interest rate cuts proceeding alongside balance sheet reduction." However, Deutsche Bank believes that implementing "rate cuts alongside QT" presupposes that regulatory reforms reduce banks' reserve requirements, the feasibility of which is questionable in the short term.

The market needs to closely monitor whether the new Chair can maintain independence under pressure from Trump for significant rate cuts, as well as the process of establishing his policy credibility. Furthermore, regarding market concerns about "radical reform," Warsh offered reassurance. He explicitly stated that there is no need to "smash and reform" the Fed, but rather to pursue a "revival." Regarding the outlook for the US economy, Warsh believes it is not in recession but is experiencing an AI-driven productivity boom akin to the Reagan era. He argues that as long as policy returns to rationality, the US economy will demonstrate remarkable resilience.

The policy direction of the Federal Reserve is under close market scrutiny as current Chair Jerome Powell is set to step down in May 2026 (Note: his term as a Governor ends on January 31, 2028). John Davies, a US利率 strategist at Standard Chartered, noted that market pricing continues to suggest the Fed will hold rates steady for the remainder of Powell's term. The market has not fully priced in expectations for further rate cuts before the July meeting, but for the first policy meeting under the next Fed Chair in June, the probability of a cut is already priced at 75%. He said, "Given mixed data and lingering uncertainty around Trump's nomination for the next Chair, we doubt there will be a material change in near-term Fed policy pricing."

The CIO of UBS Wealth Management stated that the market currently widely expects another rate cut possible after Powell's term ends, i.e., in July. Barclays maintains its baseline expectation that the Fed will cut rates by 25 basis points each in June and December of this year, once confident that inflation is returning to the 2% target. However, Marc Giannoni, US Economist at Barclays, believes the risks are tilted towards the possibility of rate cuts being delayed further, suggesting that despite the change in Fed leadership, the FOMC's reaction function will likely remain largely unchanged.

The fixed income team at Value Partners pointed out that during a phase of increasing political cycle and personnel uncertainty, the downward trend of the US dollar index and price volatility in safe-haven assets may reflect market sentiment towards these uncertainties; the fluctuation range for safe-haven assets like the US dollar and gold could be higher than previous levels.