With all the focus on Bessent, are we underestimating Kevin Warsh?

There was a big rally in bonds on Monday and they’ve held up well today despite a moderate retracement. Much of the talk on Monday was about Scott Bessent getting the nomination for Treasury Secretary but what might have driven a big part of the move was a detail in many of the stories reporting on Besent — Kevin Warsh was a finalist but continued to push for Fed chair instead.

Warsh was a former Fed Governor who quit in 2011, disagreed with QE2 and was generally hawkish. After Trump’s disputes with with Fed Chair Powell, he reportedly said to Warsh that he should have pushed harder for the job.

“I could have used you a little bit here,” Trump told Warsh in 2020. “Why weren’t you more forceful when you wanted that job?”

He was considered for the Treasury job but floated an idea where he would resign it to shift to the Fed after Powell. That detail in an WSJ report highlights how badly he’s pushing for the job, and (I believe) how likely he is to get it.

He’s married to the heir of the Estée Lauder fortune and his in-laws have donated to Trump and held fundraisers.

Ultimately, the next Fed chair pick will have a larger effect on policy than Bessent and Warsh is likely to keep rates higher if/when he’s appointed for a term beginning in May 2026. That should keep a tighter lid on inflation and drive down long-term rates.

This article was written by Adam Button at www.forexlive.com.