Warsh May Struggle to Lay Down New Rules for Fed

Trump's nominee faces challenges in balancing policy ideals and pragmatic realities

Published on Feb. 5, 2026

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Kevin Warsh, President Donald Trump's nominee to run the Federal Reserve, has long advocated for a central bank with a smaller role in the economy and more rules-based policies. But his past statements suggest he may struggle to implement such an approach, as he has acknowledged the messy realities of steering a complex economy and offered reasons to justify lowering interest rates even with inflation above the Fed's target.

Why it matters

Warsh's nomination represents a potential shift in the Fed's approach, as he has been critical of the central bank's crisis-era policies and expansive role in financial markets. However, his pragmatic tendencies may make it difficult for him to enact the kind of sweeping changes he has advocated for in the past.

The details

Warsh, a former Fed governor, has been a vocal proponent of limiting the central bank's footprint and using policy rules to guide rate decisions. But he has also acknowledged the challenges of implementing such an approach, describing policy rules as 'aspirational' and saying that shrinking the Fed's balance sheet would be difficult. Warsh may need to reconcile his ideological leanings with the practical realities of steering the economy, which could involve explaining why he wants to deviate from the rules he has championed.

  • Warsh's nomination will be considered by the U.S. Senate sometime before May 22, when current Fed Chair Jerome Powell's term ends.
  • Warsh has been critical of the Fed's policies since leaving the central bank in 2011.

The players

Kevin Warsh

A former Federal Reserve governor who has been nominated by President Donald Trump to run the central bank. Warsh has advocated for a more limited role for the Fed and a greater reliance on policy rules.

Jerome Powell

The current chair of the Federal Reserve, whose term is set to end on May 22.

Milton Friedman

The late economist whose ideas on monetarism have influenced Warsh's thinking.

John Taylor

An economist whose policy rule framework has also shaped Warsh's views on central banking.

Donald Trump

The U.S. president who has nominated Warsh to lead the Federal Reserve.

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What they’re saying

“The economy cannot thrive … with a fully discretionary central bank and central bankers acting as overlords.”

— Kevin Warsh, Former Federal Reserve Governor (Hoover Institution)

“Rules with discretion. He is not going to be hidebound to anything.”

— Michael Bordo, Professor Emeritus, Rutgers University (Interview)

“If you want to move in a more rule-like direction, that is the way.”

— John Cochrane, Fellow, Hoover Institution (Interview)

What’s next

Warsh's confirmation hearings in the U.S. Senate will provide a key opportunity to understand how he plans to reconcile his ideological views on central banking with the practical realities of steering the economy.

The takeaway

Warsh's nomination represents a potential shift in the Federal Reserve's approach, but his pragmatic tendencies may make it difficult for him to fully implement the kind of sweeping changes he has advocated for in the past. His ability to balance his policy ideals with the messy realities of central banking will be a key focus as he goes through the confirmation process.