Trump set to nominate Kevin Warsh as Fed chair; markets and prediction odds shift

The Trump administration is preparing to nominate Kevin Warsh as the next Federal Reserve Chair, Bloomberg reported, with a formal announcement expected Friday morning; the selection is not final until the president makes the announcement. Warsh, a former Fed governor, visited the White House Thursday and quickly surged in prediction markets — Polymarket showed an 87% probability on $289 million traded and Kalshi 86% on $74 million.

Markets reacted to the news as stocks fell, Treasury yields rose, the dollar extended gains and precious metals declined. Trump teased the pick Thursday, saying it “won’t be too surprising” and that it would be “someone known to everyone in the financial world,” adding that “a lot of people think this is somebody that could’ve been there a few years ago.” Warsh served as a Fed governor from 2006 to 2011 and has called for a structural overhaul of the central bank.

He has argued recently for lower interest rates while criticizing quantitative easing; analysts cited by the source say he combines dovish rate preferences with a hawkish view on shrinking the Fed’s balance sheet. Commentators including Deutsche Bank’s Matthew Luzzetti and RSM’s Joseph Brusuelas have offered differing assessments of how that mix would work in practice.

His opposition to QE could reshape the liquidity environment that has supported risk assets, including cryptocurrencies. The Fed balance sheet is now roughly $6.5 trillion, down from $8.9 trillion in 2022.

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