Trump nominates Kevin Warsh as Fed Chair, roiling markets
Former governor faces Senate confirmation fight as Powell faces criminal investigation over testimony
President Donald Trump nominated former Federal Reserve Governor Kevin Warsh on Thursday to succeed Jerome Powell as Fed Chair, a move that sparked sharp volatility in financial markets and triggered an immediate confirmation battle in the Senate. Warsh, 55, who served as a Fed governor from 2006 to 2011 and was the youngest person ever to hold that position, would begin his four-year term in May 2026.
Trump announced the decision on his Truth Social platform, praising Warsh as potentially "one of the GREAT Fed Chairmen, maybe the best" and describing him as "central casting." The nomination comes as Powell faces a criminal investigation launched by the U.S. Attorney's Office for the District of Columbia over allegations he misled Congress about $2.5 billion in cost overruns for the Federal Reserve's headquarters renovation.
Markets reacted swiftly to the news. Spot gold prices, which had been on a record-setting rally, tumbled 4.5% after initially dropping as much as 7.5%. Silver plunged 10.3% following an initial nearly 13% decline. The U.S. dollar strengthened against major currencies before paring gains, while Wall Street opened lower with mining stocks leading declines. The moves reflected investor expectations that Warsh, despite his recent dovish rhetoric, might ultimately prove less accommodative than market participants had hoped.
Warsh's monetary policy credentials have shifted considerably over his career. During his tenure at the Fed, he was viewed as a hawk, generally advocating for higher interest rates to combat inflation. More recently, however, he has aligned with Trump's public demands for lower rates, creating uncertainty about his approach if confirmed. The Fed has already cut rates three times since September, but officials had projected only one additional reduction this year.
The confirmation process faces significant hurdles despite Republicans holding a 53-seat Senate majority. Senator Thom Tillis of North Carolina said he would vote against any of Trump's Fed nominees until the Powell investigation is resolved, calling Warsh "qualified" but insisting on accountability. Democrats have voiced strong opposition, with Senator Elizabeth Warren arguing that no Republican concerned about Fed independence should support the nomination.
The Powell investigation centers on his June 2025 testimony to Congress regarding the renovation cost overruns. Grand jury subpoenas were served to the Federal Reserve this month, and U.S. Attorney Jeanine Pirro opened the inquiry after the Fed reportedly did not respond to requests for information about the escalating expenses. Powell has defended the Fed's actions, attributing cost increases to historic preservation requirements and supply chain issues, and has emphasized the central bank's independence from political interference.
The unprecedented criminal probe into a sitting Fed Chair has drawn criticism from former central bankers worldwide, who view it as a threat to monetary policy autonomy. Treasury Secretary Scott Bessent has defended the investigation, stating that "independence does not mean no accountability" and that he had called for an internal investigation since spring 2025.
Warsh currently serves as a fellow at the Hoover Institution and a lecturer at Stanford Graduate School of Business. His confirmation hearings are expected to focus heavily on his views on Fed independence, his evolving stance on interest rates, and how he would navigate the political pressures from the Trump administration that have increasingly targeted the central bank.