Filenews 4 February 2026
By Jonathan Lev
President Donald Trump has turned the search for a new chairman of the US Federal Reserve into a game show, and the "winner" is Kevin Wars, the strangest choice. A decision that is sure to increase volatility in the markets and will not satisfy anyone – probably not even the president.
Above all, this choice will cause enormous confusion throughout Wall Street and political circles. While Trump had promised to pick a Fed chairman who would introduce a looser monetary policy, Wars has been considered a "hawk" since his five-year term as a member of the Fed's Board of Directors ended in 2011.
This profile will make it difficult for Wars to build credibility. If he cuts interest rates, the markets will see him as a servant of Trump who has abandoned his principles. If he keeps interest rates high for too long, he will come into conflict with the president in the foreseeable future – and that will create instability in itself. By the end of his term in May, incumbent Fed Chair Jerome Powell will gain a shadow, creating "mixed messages" that markets will have to analyze and that may lead to misunderstandings.
Wars's instinctive reactions are well known. In November 2010, when the unemployment rate was at 9.8 percent and the Personal Consumption Expenditures (PCE) index – the Fed's preferred inflation rate – was just 1.3 percent, Wars strongly opposed a second round of quantitative easing. "If I were in your place, I would not be leading the committee in that direction," he told Chairman Ben Bernanke, according to minutes published much later. In retrospect, many observers of the "jobless growth" of the 2010s now wish more had been done to support the economy, not less.
Fifteen years later, Wars was still promoting a similar message. He criticized the Fed's moves during the pandemic and blamed money printing and fiscal stimulus for inflation that followed, ignoring supply chains and the Russian invasion of Ukraine that led to a surge in global energy prices. He continues to speak out against the perceived risks of the Fed's large balance sheet and even criticized the Fed's modest interest rate cuts in 2024.
Wars only became more moderate when the debate about the next Fed chairman began, and even now, he is not so clear: he has advocated cutting interest rates, but also a significantly smaller balance sheet.
Wars' path to the Fed will not be smooth. North Carolina Republican Senator Tom Tillis, who is a member of the Banking Affairs Committee, has pledged to block any Trump nominee for the Fed until the U.S. Department of Justice completes the investigation into the renovation of the central bank at its headquarters in Washington. Otherwise, he will not face further resistance from Republican senators.
However, Wars appears to have been chosen because he was one of the last candidates left when Trump's team was let down by Kevin Hassett, director of the National Economic Council. As recently as December, Hassett was the favourite in the betting markets. However, bets on Haschet appeared to push long-term bond yields higher, and Wall Street executives reportedly warned the government not to choose someone considered so close to Trump for the independent central bank.
The problem with Hassett was that his credibility had suffered since he had been working as a spokesman for the Trump administration. However, it is possible that the real Kevin Hassett, as soon as he took office, had set his limits in terms of his independence, and even showed good political instincts. Perhaps he would return to the worldview he adopted during his years at think tanks, or when he advised more moderate Republicans, such as Mitt Romney and John McCain.
In this case, we already know that the real Kevin Wars is a "hawk". If we witness any other version of it, it will probably lead us to believe that it bows to Trump. His personal closeness to the president, as the son-in-law of Republican major donor Ronald Lauder – son of Estee Lauder's heiress – will not help his image.
His candidacy also seems to have received a boost from extremely superficial reasons: his appearance. In the social media post where the decision was announced, the president described it as "central casting".
Of course, it's entirely possible that Wars will evolve into a more conventional Fed chair under the watchful eye of the markets. However, his early days in the position are likely to prove difficult.
The only consolation is that Wars will not have absolute authority to direct the central bank. Policy is set by a group of 12 executives in the Federal Open Market Commission, and sound and convincing economic arguments will be needed to fundamentally change the direction of policy.
Other than that, the situation is not so favourable for the world's most important central bank. Policymakers face major risks to both price stability and maximum employment, which are part of their dual mandate. The path ahead of it is extremely uncertain and will only be revealed after a careful study of the economy's figures – not on the basis of "dogma". And by choosing Wars for the position, Trump seems to have put himself and the American people in a difficult position.
