Last week, President Donald Trump said, “I think the two Kevins are great.”
Trump was referring to Kevin Warsh, a former governor of the Federal Reserve Board, the Fed, and Kevin Hassett, the head of Trump’s National Economic Council. The financial markets believe that Trump will select one of these two men as the next Fed chairman. At the moment, betting markets favor Warsh. But with Trump, no one ever knows.
Hassett would be a poor choice. He is a longtime Trump ally. He is an outspoken advocate of unconventional policies, including tariffs. Recently, individuals close to Trump have pushed back on the idea of naming Hassett as the next Fed chairman. Market participants see Hassett as too inclined to bow to the wishes of Trump. Financial experts know that when a president becomes overly influential over monetary policy, inflation rises and economic growth slows, a bad combination.
On the other hand, Warsh would be an outstanding chairman of the Fed. He is an inflation hawk. Low contained inflation, defined as stable 2% inflation, is essential to a well-functioning economy. When inflation is low and stable, businesses have certainty about investment plans, and consumers have certainty about spending and saving decisions.
Warsh is a conservative fellow at the Hoover Institution, a place where capitalism and small government are celebrated. He understands what causes inflation: excess money supply, a too high federal deficit, and too low interest rates, which encourage excessive consumption. Warsh believes in the artificial intelligence revolution. He believes that AI will lead to a sustained improvement in U.S. productivity growth, which will enable the U.S. economy to grow faster over time without causing an inflation spiral. Warsh is optimistic about America’s future.
He also has credibility. He offers something rare in central banking: an institutionalist with market fluency, historical memory, and a clear-eyed skepticism toward excess money supply and government deficits. Warsh served on the Federal Reserve Board from 2006 to 2011. He was at the heart of decision-making during the worst financial crisis since the Great Depression. Warsh remembers what it’s like when markets break.
He knows that the Fed must act decisively in times of crisis, but also that aggressive actions by the Fed must be temporary.
Warsh also understands markets. Before joining the Fed, he worked in investment banking and served as a senior economic adviser during the administration of President George W. Bush. Warsh believes in real-world incentives. He believes in price signals. Warsh understands how policy decisions ripple through capital allocation decisions, financial leverage choices, and market expectations.
Warsh has been a harsh critic of the Fed’s post-2008 policies. He has questioned whether years of near-zero rates distorted price signals, inflated asset values, and encouraged fiscal irresponsibility. He is not an ideologue. He is an institutionalist. Warsh has consistently warned that a Fed that routinely finances government deficits threatens its own independence.
Warsh is a great communicator. He explains his views clearly. He does not pretend that policy choices are cost-free. He knows that painful decisions are sometimes necessary in the pursuit of low contained inflation. He opposes forward guidance, which promises certainty but delivers surprise.
Warsh would be a chairman of the Fed who speaks plainly, acknowledges uncertainty, and understands economic trade-offs between growth, inflation, and employment. Warsh does not have all the answers, but he understands that deficits and inflation undermine the economy of the U.S. This is a time when the Fed must rebuild political credibility and re-anchor expectations of 2% inflation. He is a compelling candidate for the position of chair of the Federal Reserve Board.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He publishes a daily Substack on financial markets, politics, and society. He can be followed on X and reached at [email protected].
