Kevin Warsh to Be Sworn In Friday at White House

• Kevin Warsh will officially take over as Federal Reserve Chair on Friday.
• Warsh supports a policy mix of balance sheet reduction and future rate cuts.
• Fed officials want to keep future rate hike options open amid inflation concerns.

Kevin Warsh will officially take over as the next chair of the U.S. Federal Reserve on Friday, with President Donald Trump hosting the swearing-in ceremony at the White House. 

Notably, Federal Reserve chairs are normally sworn in internally. The last chair to take the oath at the White House was Alan Greenspan in 1987. Trump’s appearance indicates how closely the administration is tying itself to the next phase of Fed policy.

Warsh replaces Jerome Powell at a difficult moment for the central bank. Inflation remains above the Fed’s 2% target, bond yields are rising, and markets have sharply reduced expectations for aggressive rate cuts.

The market now wants to know whether Warsh can actually restart the easing cycle that Trump has pushed for publicly.

Warsh Wants Rate Cuts Without More QE

Warsh is not entering the office with a standard dovish playbook. He has repeatedly argued that the Fed relied too heavily on quantitative easing over the last decade.

In his view, large-scale bond buying inflated asset prices, widened wealth gaps, and distorted financial markets without delivering equal benefits to the broader economy.

Instead of restarting QE, Warsh supports a mix of balance sheet reduction and lower interest rates. His framework leans on quantitative tightening rather than money printing.

This means the Fed would continue shrinking its balance sheet while potentially lowering rates later if inflation slows enough. The idea is to keep pressure on excess liquidity while reducing borrowing costs for businesses and consumers.

Interest-rate futures currently show almost no chance of a cut at the June Federal Open Market Committee meeting. CME FedWatch data also points to markets expecting rates to stay unchanged through July.

Internal Resistance May Slow Policy Changes

Warsh may control the chair, but he does not control the entire Fed. Recent FOMC meetings already showed division inside the central bank as 3 regional Fed officials voted against softer guidance at the April meeting.

Several policymakers now want the Fed to keep the option for future hikes open if inflation continues rising, creating a problem for Warsh early in his tenure. If he pushes too hard for cuts while inflation remains elevated, markets could view the Fed as politically compromised under Trump.

At the same time, refusing to ease at all risks conflicts with the White House, which has openly demanded lower rates for months. Warsh is likely to take a middle route initially.

Markets are increasingly expecting the Fed to maintain rates while tightening liquidity through continued balance sheet reduction. 

However, if Warsh keeps shrinking the Fed balance sheet aggressively through QT, dollar liquidity could tighten further across markets. Historically, this has pressured risk assets, including crypto.

However, if inflation stabilizes later and Warsh eventually moves toward rate cuts without restarting QE, BTC could regain momentum.

Related: Inflation Surge to 3.8% Complicates Kevin Warsh’s Expected Fed Takeover