President Donald Trump has nominated Kevin Warsh, a former Federal Reserve governor with a hawkish streak on inflation, to chair the central bank, ending months of drama that made Jerome Powell’s tenure look like a bad family reunion.
Markets responded with the financial equivalent of a collective exhale: gold prices tumbled about 9%, silver cratered a staggering 28-31% in one of its worst days on record, and stocks dipped modestly as the dollar perked up.
This plunge in precious metals, after their long joyride to record highs fueled by uncertainty and speculative froth, signals investors betting on a steadier hand at the Fed—one less likely to crank interest rates down to basement levels just because the boss wants cheaper borrowing for splashy headlines.
The nomination arrives amid Trump’s year-long feud with the institution he once helmed through Powell’s appointment. What started as policy disagreements escalated into name-calling—Powell branded a “clown” with questionable mental faculties—and escalated further into Justice Department probes targeting Fed officials, including a criminal investigation into Powell over office renovations and scrutiny of Governor Lisa Cook’s past mortgage documents.
Most observers dismissed these as thin gruel, yet they rattled nerves about central bank independence, a principle that has kept economies from repeating 1970s stagflation disasters or the more recent meltdowns in places like Argentina and Turkey.
International central bankers rallied around Powell, issuing statements that independence remains the bedrock of stability. Powell fired back, insisting rates reflect economic data, not presidential wish lists.
Enter Kevin Warsh, who served as a Fed governor during the 2008 crisis and later advised both Bush and Trump administrations. Seen as more independent than alternatives like Kevin Hassett—who carried too much White House scent—Warsh built his reputation as an inflation hawk, fretting about price pressures even when jobs were the priority post-crisis.
Lately, he’s nodded toward Trump’s calls for lower rates, leaving observers wondering if the old hawk will resurface once confirmed or if he’ll keep singing the dovish tune.
The market’s sharp reaction suggests bettors are pricing in tougher inflation control and fewer fireworks over rate cuts. Gold and silver thrive on chaos and easy money fears; their sudden sell-off whispers confidence that the Fed might stay boringly focused on its dual mandate rather than political score-settling.
Wall Street’s modest losses reflect a mix of relief and caution—fewer wild swings ahead, perhaps, but no guarantee of endless bull runs.
Warsh’s path requires Senate confirmation, where some Republicans have tied support to resolving the lingering probes into current Fed leaders. If he clears that hurdle, the central bank could shift toward a more disciplined stance on prices, even if it disappoints fans of perpetual low rates.
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