Fed Chair Nominee Kevin Warsh Just Threw Jerome Powell Under the Bus and Signaled a Major Shift at the Central Bank

Key Points:

• Jerome Powell's term as Federal Reserve chair ends on May 15, with Kevin Warsh nominated to succeed him, potentially ushering in increased volatility for major stock indices like the Dow Jones, S&P 500, and Nasdaq.
• Powell, appointed by Donald Trump, faced public disagreements with the former president over interest rate policies, contributing to the decision not to extend his term for a third four-year period.
• Kevin Warsh, a former Fed Board governor and FOMC voting member, brings experience but signals significant policy shifts, particularly regarding the Fed's large balance sheet.
• Warsh criticized the expansion of the Fed's balance sheet from under $900 billion in 2008 to nearly $9 trillion by 2022, suggesting that a smaller balance sheet could lead to lower interest rates, reduced inflation, and a stronger economy.
• Reducing the balance sheet by selling bonds could increase borrowing costs and negatively impact lending markets and stock valuations, especially in sectors reliant on low interest rates like AI data center expansion.