German economist Jens Südekum suggests that the profile of Kevin Warsh, who is succeeding Jerome Powell as Chair of the U.S. Federal Reserve (Fed), is well-defined. Südekum, who teaches economics at the University of Düsseldorf, told German newspapers that Powell had successfully defended the central bank’s independence against repeated hostility and attacks from Donald Trump. He argued that this preservation of credibility was crucial not only for the dollar but for the global economy as a whole.
However, Südekum cautioned that Warsh will need to prove that he can fill the significant shoes left by Powell. While wishing him well, Südekum strongly warned against the Fed becoming a “weak and pliable” institution that simply implements directives coming from the White House.
The economist, who also advises Federal Finance Minister Lars Klingbeil (SPD), predicts that Warsh will face immense pressure from day one in his new role. According to Südekum, the Fed is more divided than ever. He pointed out that recent data suggests the U.S. economy could approach five percent inflation, making interest rate cuts-which Donald Trump had repeatedly demanded-inherently difficult. Despite this economic reality, certain Trump-aligned representatives within the Fed continue to demand such cuts, running head-on into the staunch resistance of traditional central bankers, including former Chair Jerome Powell.
Warsh assumed the role of Fed Chair on Friday. Given that the Fed determines U.S. policy interest rates, this intense political pressure is considerable, especially as Warsh is seen as a supporter of former President Donald Trump.