‘America First’ Fed? Chinese economists doubt Trump’s chair nominee can shore up US dollar
Kevin Warsh unlikely to deliver long-term rebound while central bank independence still at risk, analysts say
US President Donald Trump’s nomination of Kevin Warsh to head the Federal Reserve is unlikely to support a sustained rebound in the US dollar despite the possibility of short-term relief, Chinese economists said.
Persistent doubts about the Fed’s autonomy during Trump’s second term could cap any durable recovery, as policy appeared increasingly geared towards domestic goals at the expense of the US dollar’s role as a global public good, they added.
Analysts at China International Capital Corp, a Beijing-based state-backed investment management firm, called Warsh’s proposals “hawkish” in terms of reducing the Fed’s balance sheet but “dovish” on rate cuts, arguing that he could seek to restore monetary policy credibility while pushing an “America First” agenda in the financial sector.
“In the short term, Warsh’s nomination will have limited impact on the rate-cut path, but it may lead to a revision of expectations for US dollar liquidity, and depreciation pressure on the US dollar may ease temporarily,” they wrote in a note on Sunday.
His proposals could leave the global financial system facing a “scarcer but more stable US dollar environment”, they added, as the dollar system would become more closely aligned with domestic priorities.