Kevin Warsh checks a lot of boxes that Federal Reserve watchers care about.
But the top economist at Moody’s Analytics, Mark Zandi, says the real test is whether Warsh can keep politics out of interest rate decisions.
“Kevin Warsh is a reasonable choice for the next Federal Reserve chair. His obvious strength is his previous stint on the Fed during the Global Financial Crisis. He knows the institution and everyone in global central banking circles,” Zandi wrote in an X post on Sunday.
“But the critical question is whether he will be strong enough to ensure that interest rates are set based on the economy, and not politics,” he added.
Zandi said this will not be an easy feat, given that President Donald Trump has been pressuring the Fed to lower rates.
Trump also hopes the next Fed chair will consult him over future interest rate decisions, The Wall Street Journal reported in December.
“Warsh’s ostensible views on the use of the Fed’s balance sheet or its data dependency are quirky, even odd, but his legacy as Fed chair will be determined by how much of the Fed’s independence he is able to preserve,” Zandi said.
Warsh spent his early career working at Morgan Stanley before becoming an economic advisor to President George W. Bush in 2002.
He served on the Fed’s Board of Governors from 2006 to 2011, after being nominated by Bush. His time there also overlapped with the 2008 financial crisis.
Zandi said these credentials show “he is well-versed in financial markets, which is especially important when markets go off the rails, which they will almost surely do some time during his four-year term.”
Warsh’s Wall Street and Fed credentials have earned him respect with many other leading figures in business and economics.
The renowned economist Mohamed El-Erian said the former Wall Streeter would bring “deep expertise” as chair, while Alan Howard, the billionaire founder of macro hedge fund Brevan Howard, praised Warsh’s “depth of experience”.
Others echo Zandi’s emphasis on the importance of Warsh preserving the Fed’s independence.
Joseph Brusuelas, principal and chief economist for RSM US LLP, said Warsh meets the bar to lead the Fed, but he should be questioned on central bank independence.
Atlanta Fed President Raphael Bostic said on CNBC’s ‘Squawk Box’ Friday that the Fed’s independence is “always something that we need to protect.”