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President Trump's nominee to be the next Fed chair figures to overhaul how the central bank tries to steer the economy.
By
David Payne
published
12 February 2026
in Features
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Signup + An account already exists for this email address, please log in. Subscribe to our newsletterMajor change is afoot in Washington. A new chairman of the Federal Reserve has been named to fill arguably the most important job in the country for shaping the course of the economy. What can we expect from the new chair? Kevin Warsh will do things differently once he is eventually confirmed to take over for outgoing Chair Jay Powell, in office since 2017.
He will want to tighten the Federal Reserve's focus, concentrating on core monetary and financial policy, and dispensing with what he has called side issues, such as climate change and combating inequality.
He also won’t let the Federal Reserve issue a digital dollar, though he does want it to police cryptocurrency. Will Warsh be a monetary hawk or dove? A bit of both. He favors cutting interest rates to give the economy a boost, which President Trump has made clear he wants the next chair to do.
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Sign upHe also wants to trim the Federal Reserve's holdings of Treasuries and mortgage-backed securities, which ballooned after the 2008 financial crisis and shot up again when COVID-19 slammed markets. Warsh believes so-called quantitative easing is permissible during real crises, but that such money printing otherwise tempts politicians to run bigger deficits.
Curbing the Federal Reserve balance sheet could push up long-term interest rates. Short-term credit markets could also grow volatile as the Federal Reserve shrinks its holdings. Expect Warsh to also operate differently from how Powell made policy. He’ll worry less about the latest economic data and stick to long-term goals for where he thinks interest rates should be.
So, the latest jobs or inflation report may matter less to Warsh and his colleagues during their regular deliberations. Look for him to trim the Federal Reserve's benchmark rate a couple of times this year. But if he thinks inflation is too high or not falling enough, he’ll raise rates.
Warsh, a former Federal Reserve governor, has blamed the central bank for letting inflation soar after the pandemic ended by keeping its policy too loose. Warsh thinks that inflation is a choice that central banks make, and he is determined to choose to combat it. When it comes to the economy’s prospects, Warsh is an optimist. He thinks that artificial intelligence and Trump’s deregulatory push will boost GDP growth. That in turn would raise tax revenues and help get today’s huge deficits under control.
Trillions in potential future revenue are riding on whether that vision comes to pass. Note that Warsh’s confirmation may not be smooth. Senator Thom Tillis (R-NC) has said he will hold up confirmation votes on any new Federal Reserve nominee until the probe the Justice Department has initiated against Chair Powell has been dropped. Tillis argues that the investigation is a political ploy to get Powell to resign and a threat to the Federal Reserve.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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David PayneSocial Links NavigationStaff Economist, The Kiplinger LetterDavid is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.
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