Media365
US President Donald Trump’s nomination of Kevin Warsh to head the Federal Reserve is likely to add more volatility to global financial markets, as his historical stance against financial easing could complicate the Fed’s decision-making in terms of monetary easing, according to analysts.
The White House nomination came a month after Trump said the former Fed governor, who opposed rate cuts during the 2008 global financial crisis, would be his choice to succeed Jerome Powell, whose chair term ends in May.
Warsh’s official appointment still requires Senate confirmation.
UK money manager Schroders said in a report on Thursday that longer-dated US Treasuries had yet to fully price in Warsh’s succession and that they still had some downside room. HSBC Qianhai Securities argued that emerging stock markets, including Chinese equities, would face challenges if the Fed refrains from expanding its balance sheet.
“Warsh has shifted from a strict hawk to more of a ‘pro‑growth reformer’, which may explain his appeal to the administration,” said Bertram Lai, analyst at CGS International. “A smaller Fed balance sheet paired with lower rates is worth watching in the weeks ahead.”
The uncertainty around a new Fed chairmanship adds to challenges facing investors, who have endured declines in stocks and bonds over the past week after US strikes against Iran drove up oil prices and reignited stagflation concerns.
