President Trump’s choice to lead the Federal Reserve might not result in the lower mortgage rates he’s hoping for.
Trump has nominated Kevin Warsh to succeed Jerome Powell at the Fed when Powell’s term ends in May, CNBC reported. Despite the Fed lowering interest rates three times in 2025, Trump has regularly heaped criticism on Powell.
Trump has increasingly focused on making housing more affordable and hopes Fed policy can help lower mortgage rates. However, at least one former Fed official is warning that Warsh’s leadership would take the Fed in the opposite direction Trump hopes, according to the Washington Post.
Warsh, whose appointment must be confirmed by the Senate, has been critical of the Fed’s $6.6 trillion balance sheet of Treasury bonds and mortgage-backed securities. Warsh is a financier and bank executive who served on the Fed Board of Governors from 2006 to 2011.
“If all he does is move to a smaller Fed balance sheet, it’s hard to see how that would be consistent with lower mortgage rates, and that creates some tension with the president,” Bill English, a Yale professor and former director of the Fed’s division of monetary affairs told the Washington Post.
If Warsh seeks to reduce the Fed’s balance sheet, that could run counter to lower mortgage rates, the Washington Post reported. Fed asset purchases tend to make borrowing cheaper because they push Treasury yields lower which can drive rates lower.
However, David Bahnsen, chief investment officer of The Bahnsen Group, told CNBC that Warsh is respected and that he expected rates to decline, at least in the short term.
“He (Warsh) has the respect and credibility of the financial markets,” said Bahnsen told Squawk Box. “There was no person who was going to get this job who wasn’t going to be cutting rates in the short term. However, I believe longer term he will be a credible candidate.”
