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In news that is not about Minnesota, president Trump is pushing for Kevin Warsh as Jerome Powell's replacement at the he'd of the Federal Reserve..
Jerome Powell was picked by Trump during his first term, replacing Janet Yellen. His tenure has been marked with volatile markets (both up and down), high inflation, the end of ZIRP, and more recently, political turmoil.
That last bit is unusual. The federal reserve is allegedly an independent body, and the chairman is nominally apolitical. In the last few years, this set of beliefs has begun to fray, particularly on the right. Powell and Trump have always had disagreements about interest rates, but that came to a head during the election of 2024.
Rates have remained high since then, although cuts have occurred.
Since then, the administration has called for Powell's dismissal, and a recent investigation has caused enough strife that Powell has announced that he will be stepping down from the position.
Trump's replacement, Warsh, has previously served as a Fed governor during the 2008 financial crisis. Historically, he has been very concerned about inflation, as well as the effects of printing more money. This seems to conflict with Trump's stated goals of lowering the interest rate.
What is going on here? Has Warsh had a change of heart?
No, his term as chairman is expiring, and it's customary for the fed chair to leave the board upon the end of the chair's term. He could stay on until 2028 but will likely choose not to as did many chairmen before him.
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It’d be nice if Trump locked-in on the meat and potatoes of 1. stamping out affirmative action in education and employment, 2. deporting more illegal immigrants and more quickly, and 3. downsizing the federal workforce, instead of seething over Powell, shooting himself in the foot with tariffs, and cozying up to people like Nicki Minaj. Especially since 1., 2., and 3. also help set the Overton window for the rest of the world.
Well Trump’s not an ideologue, though. Thats the whole thing. He wants power for himself, ‘greatness’ for America, etc. He doesn’t have firm opinions on a lot of those things.
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I wish this was true as well but Trump loves tariffs. If it's not his number one thing it's second to immigration.
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If as an organization you don’t want to seem political - then don’t be political. The fed has made two mistakes here.
Like everything else especially on the Dem appointment side the Fed was woke 2020-2024. All th bosses had to find their next gig or wanted Powell’s job. Things like we need to keep rates low because of black unemployment etc which is something most people think monetary policy is not a viable tool to target.
On policy decision judgement calls my vibe is the fed has given Dems easier policy than GOP. 2018 we had a Dec stock market crash during a hiking cycle. We didn’t have inflation and a plausible argument could be made with had 30-40 bps of output gap to run it hotter. And during the Biden administration we had the reverse polio and let inflation get stupid. The supply shock were mostly wrong as we had huge surges in nominal spending. Supply shock inflation would have shown inflation but nominal spending in line with long term growth rates (around 4%). It is a judgement call but it certainly vibes to me that Dems had a different strike zone.
I don’t follow fed policy that closely but the cut right before the last presidential election just seemed ridiculous, if there is a strong (non political) reason for this I would be interested in hearing what it is.
It’s also very hard to look at someone like Lisa Cooks resume (her academic research as highlighted on Wikipedia mostly sounds like social justice bullshit), and conclude that she was put there for any reason other than political loyalty
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Trump has had… lots of appointees that didn't agree with him much. RFK wasn’t someone I would’ve expected to be on the Trump train.
Perhaps Warsh is expected to be more susceptible to political influence?
I think the main consideration he has is for legacy setting, so his best shot is hiring outsider wonks who push for bold reforms. Not sure how Warsh fits there.
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My current theory is that Warsh told Trump what he wanted to hear.
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I don't know why Trump wants lower rates. That seems stupid given that he just won an election due to high inflation.
I suspect that Trump's true objection is out of principle. Trump is the unitary executive theory personified. The idea that there is government policy that he has no ability to influence is offensive to him. The Federal Reserve is simply too important for Trump to not care about it.
There's the perception that lower rates boost stock prices.
Lower rates make the government debt more easily serviceable.
Lower mortgage rates will prop up home prices for the boomers by putting upward pressure on demand through low financing costs (or, the effect on demand may cancel out, but lower interest rates provide room for higher home prices before demand is affected.)
I think inflation takes priority over all those considerations but I didn't get elected president. So here we are.
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At least part of why Trump wants to lower the rates has to do with housing. He's been flailing around a lot on the topic lately, trying to find something that might resonate with younger voters without causing a meltdown among people who have a significant portion of their net worth wrapped up in property.
6 - 7% interest rates when prices are this high is pretty brutal. I'm not sure how it compares in real, day-to-day costs vs the bad old days of the 1980s, but it sure hurts.
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Perhaps he does not believe that lowering rates causes higher inflation. I don't either. Anyway, the jobs situation is pretty dire at the moment (job growth is ~0) and that's the other half of the misery index.
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