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Kevin Warsh is not permanently hawkish on monetary policy despite his reputation for a conservative stance on rates, according to Stanley Druckenmiller, the billionaire investor and longtime mentor of Donald Trump’s Federal Reserve chair nominee.
“The branding of Kevin as someone who’s always hawkish is not correct,” Druckenmiller said in an interview with the FT on Friday, shortly after Trump nominated Warsh to replace Jay Powell as Fed chair. “I’ve seen him go both ways.”
Trump has relentlessly called for the Fed to lower interest rates, calling Powell a “moron” and “stubborn” mule for not reducing borrowing costs. Some analysts and investors had questioned whether Trump would give the top Fed job to Warsh, who has advocated for trimming the central bank’s balance sheet, which could increase long-term rates.
Warsh had also earned a reputation for his hawkish stance from his time as a governor at the Fed from 2006 to 2011. Transcripts of Federal Open Market Committee meetings from one of the most turbulent periods of the financial crisis in 2008 show that he reiterated concerns about inflation just days before the collapse of US investment bank Lehman Brothers.
Warsh, who has worked as a partner at Druckenmiller’s family office since 2011, was eventually “all in” on lowering interest rates during the financial crisis despite his initial scepticism, and also supported cutting rates at the beginning of the pandemic, he added.
In 2018, the pair wrote an op-ed arguing why the Fed should not lift rates immediately before the central bank decided to do so. The Fed was later forced to reverse the decision after “markets fell apart”, Druckenmiller said.
Warsh is “very open minded” to the monetary policy approach of former Fed chief Alan Greenspan, who oversaw the central bank in the 1990s during a period of intense productivity growth, according to Druckenmiller. “Kevin right now very much believes you can have growth without inflation,” he said.
One of Warsh’s biggest challenges if he is confirmed by the Senate, according to Druckenmiller, will be balancing economic growth tied to the advent of artificial intelligence without unleashing further inflation.
Warsh’s ties and proximity to Silicon Valley as a fellow at Stanford University have made him well positioned to understand both the possibilities and risks of the technology, Druckenmiller added. He said Warsh’s “tech network” would be particularly useful.
“I could not think of a single other individual on the planet better equipped,” said Druckenmiller. Warsh has worked as a partner at the billionaire’s family office Duquesne Capital Management since stepping down as a Fed governor.
Druckenmiller has also been a longtime mentor to Scott Bessent, the US Treasury secretary. He first hired Bessent to work at Soros Fund Management more than three decades ago, and the now Treasury secretary later started his own hedge fund, Key Square Capital, with money from Druckenmiller.
Bessent shares the view that an AI-induced productivity boom would enable the Fed to cut rates without stoking inflation.
Bessent and Warsh have got to know each other in large part through their shared relationship with Druckenmiller, the FT has previously reported. With Warsh nominated for Fed chair, the investor is now among the most influential economic thinkers on Wall Street, with his worldview shaping how Bessent and Warsh approach economic policy.
While Druckenmiller has supported other Republicans, he did not donate to Trump’s most recent presidential campaign and in 2024 described the then-candidate as a “blowhard”. Yet, he now has a direct line to the administration’s most important economic policymakers.
“I’m really excited about the partnership between him and Bessent,” he said. “Having an accord between the Treasury secretary and Fed chair is ideal.”