Trump’s Fed pick Kevin Warsh could shock markets with 100 bps in rate cuts this year, economist says

Economist Robin Brooks of the Brookings Institution predicts that if appointed by President Trump, Kevin Warsh could lead the Federal Reserve to aggressively cut interest rates by 100 basis points across four meetings between June and October. This projection significantly exceeds the 40 basis points currently priced in by markets and would lower the benchmark rate from 3.5%-3.75% to 2.5%-2.75% before the November mid-term elections.

Brooks suggests this aggressive easing would be a monetary policy reset acknowledging a lower neutral rate, potentially causing dollar weakness and reviving the crypto market, including Bitcoin. This forecast contradicts market fears that Warsh, due to his hawkish past as a Fed governor, would resist easing, which has already caused anxiety reflected in recent drops in Bitcoin and precious metals prices.

Brooks argues Warsh cannot afford to be hawkish, fearing a backlash from Trump similar to that faced by incumbent Chair Jerome Powell. He expects Warsh to justify lower rates by embracing a high-productivity, low-inflation narrative, potentially viewing the AI boom as a disinflationary force.

(Source：CoinDesk)