Source: Fortune
Summary
President Donald Trump has nominated Kevin Warsh as the next Federal Reserve chairman. Warsh, a former Fed governor and special assistant to President George Bush, has the credentials the market likes. He knows the inner workings of the central bank and has private sector experience, including a stint at Morgan Stanley. Warsh’s plans for the Fed include taking a more back-seat approach, which may not sit well with investors. He is also likely to follow in the footsteps of his mentor, Ben Bernanke, in terms of leadership style. Warsh has been critical of current chairman Jerome Powell’s wait-and-see approach and is bullish on the US economy.
Our Reading
The strategy enters a familiar phase. Warsh’s nomination is seen as a dovish move, with Trump making it clear that he wants a more upbeat outlook. Warsh has been critical of Powell’s approach and is likely to take a more back-seat approach, which may lead to a change in narrative. The Fed’s communication style may also shift, with Warsh focusing on broader macroeconomic topics rather than minor changes in speech language. The key question is whether Warsh can convince markets of his political independence.
Warsh’s approach is a return to the Fed’s “never apologize, never explain” roots.
Author: Evan Null
