Trump’s Fed pick Kevin Warsh May Cut Rates 100 bps Says Economist

TLDR

Table of Contents

Brooks forecasts 100 bps in Fed rate cuts under Warsh between June and October
Markets currently price only 40 bps in rate cuts over the same period
Warsh may push a disinflationary AI-driven narrative to justify easing
Bitcoin fell below $75K on fears Warsh will be too slow to cut rates

Kevin Warsh, President Donald Trump’s expected nominee for Federal Reserve Chair, may pursue faster and deeper interest rate cuts than markets expect. Economist Robin Brooks, a senior fellow at the Brookings Institution, predicts Warsh could cut rates by 100 basis points across four meetings from June to October.

Markets are currently pricing in only 40 basis points in easing over this period. The current benchmark federal funds rate stands between 3.5% and 3.75%. If Warsh follows the pace outlined by Brooks, the rate could fall to 2.5%-2.75% before the November 2026 mid-term elections.

Analysts warn that while Kevin Warsh is expected to follow Trump's mandate for rate cuts (traditionally a "bullish" signal), his long-standing commitment to shrinking the Fed's balance sheet could suck vital liquidity out of the system. #Liquidity pic.twitter.com/QQwr2L68jb
— Conor Kenny (@conorfkenny) February 2, 2026

Brooks said Tuesday that such moves would “reset monetary policy to acknowledge a lower neutral rate.” He believes this approach may support a weaker dollar and renew demand in crypto assets such as Bitcoin.

Markets React to Hawkish Concerns

Warsh’s earlier record as a hawkish Fed governor during the 2008–2009 crisis has raised doubts about his willingness to cut rates. Markets reacted strongly last week, fearing that Warsh might resist easing under pressure from the White House.

Bitcoin dropped from $84,500 on Thursday to under $75,000 by the weekend. Gold and silver also saw sharp declines, falling 9% and 26% respectively. At the same time, the U.S. Dollar Index strengthened.

Brooks said this reaction is based on a “mistaken impression.” He stated that Warsh “can’t and won’t be” hawkish because of political pressure from Trump, who previously criticized Fed Chair Jerome Powell for not lowering rates fast enough.

Trump’s Past Criticism May Shape Warsh’s Stance

During his presidency, Trump frequently attacked Powell for keeping interest rates too high. This led to tension between the Fed and the White House. Brooks argues that Warsh is unlikely to risk the same kind of backlash.

Warsh may instead justify lower rates through a narrative of high productivity and low inflation. In a November 2025 op-ed in The Wall Street Journal, Warsh pointed to technology advances, including artificial intelligence, as disinflationary forces.

“Productivity improvements should drive significant increases in real take-home wages,” he wrote. He claimed that a 1% rise in productivity growth could double living standards in one generation.

Rate Cuts May Boost Crypto and Weaken Dollar

Brooks believes Warsh’s potential rate cuts could trigger a major shift in currency and crypto markets. Lower rates typically reduce demand for the dollar, making cryptocurrencies and other assets more attractive.

He said the expected 100 basis points in cuts would exceed market pricing, making it a surprise move if it occurs. This could bring renewed momentum to the crypto sector, which has seen recent declines amid rate policy uncertainty.

The next Fed meetings are scheduled for June, July, September, and October, giving Warsh four chances to ease policy before the November elections.