Wall Street experts call Kevin Warsh nomination as next Fed chair "positive"

Dalio, the 'godfather of hedge funds,' calls it an "excellent choice"…Wall Street upbeat

Paul Krugman criticizes him: "Argued for tightening only under Democratic administrations"

Many experts are offering favorable assessments of former Fed Governor Kevin Warsh, who has been nominated as a candidate to become the next chair of the U.S. central bank (Fed). The prevailing view on Wall Street is that Warsh is a “safe choice.”

According to the industry on the 31st (local time), Mohamed El-Erian, an adviser at Allianz Group, wrote on X (formerly Twitter) that “I believe Warsh is someone who combines deep expertise, broad experience and sharp communication skills,” adding that “his pledge to reform and modernize the Fed is a good sign for enhancing policy effectiveness and safeguarding the Fed’s political independence.”

Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, also said “Warsh is an excellent choice,” assessing that “he understands well both the risks when Fed policy is excessively accommodative and the risks when it is overly tight.”

Earlier, JPMorgan Chase CEO Jamie Dimon also spoke positively of Warsh ahead of the announcement of his nomination, describing him as a candidate trusted by the market. Mark Carney, the Canadian prime minister who previously served as governor of the central banks of Canada and the U.K., likewise posted on X the previous day that “Warsh is a fantastic choice to lead the world’s most important central bank at a critical time like this,” offering a favorable appraisal.

Meanwhile, Nobel laureate Paul Krugman, a professor at the City University of New York, criticized former Fed Governor Kevin Warsh as not a “hawk” (preferring monetary tightening) but merely a “political animal.” He argued that “it is wrong to describe Warsh as a hawk on monetary policy,” adding, “he is a political animal.”

Krugman said, “When the (U.S.) Democrats held the White House, Warsh advocated tight monetary policy and opposed every attempt at stimulus,” adding that “like all Donald Trump supporters, he has consistently advocated rate cuts since November 2024.”

Warsh was appointed a Fed governor in 2006 under the George W. Bush administration and served on the Board of Governors until 2011, during the Barack Obama administration. In November 2010, when the Fed decided on its second round of quantitative easing (QE2), he was the only member of the Board to voice a critical view, warning that quantitative easing could stoke inflation.

Krugman contends that despite his argument later being proven wrong, Warsh did not acknowledge the mistake and instead continued to develop new rationales while persistently calling for rate hikes. After Trump’s election, he allegedly shifted back to supporting rate cuts.

Reporter Lee Song-ryeol, Hankyung.com yisr0203@hankyung.com