President Trump has some very ambitious thoughts about economic growth, and they all hinge on Kevin Warsh getting confirmed as the next Federal Reserve chair. During a Monday interview with Fox Business, Trump said that if Warsh "does the job that he's capable of, then we can grow at 15 per cent, I think more than that."
Fifteen percent growth would be, to put it mildly, extraordinary. For context, U.S. GDP grew at an annualized 4.3% in the July-September quarter of last year, accelerating from 3.8% the quarter before and beating expectations of 3.3%. That marked the strongest growth since Q3 2023, and it's nowhere close to 15%.
Trump also admitted in the same interview that passing over Warsh for Fed chair back in 2017 was a "really big mistake." That's quite the acknowledgment, considering he went with Jerome Powell instead, a decision that's caused him no small amount of frustration since.
Confirmation Drama Ahead
Getting Warsh into the position might be trickier than expected. Republican Senator Thom Tillis has pledged to stall all Federal Reserve nominations while the Trump administration pursues a Justice Department probe into Powell over the Fed building renovation project. When asked about the potential delay, Trump said, "I've been fighting Tillis for a long time...we'll have to see what happens."
Wall Street's Mixed Reaction
Warsh's nomination has sparked both enthusiasm and concern across financial and political circles. IBM (IBM) executive Gary Cohn praised Trump's choice, pointing to positive market reactions. On the flip side, Senator Elizabeth Warren (D-Mass.) warned that the nomination could undermine the central bank's independence.
The economic implications are being hotly debated too. Macro expert Steven Major suggested that Warsh could deliver "four or five rather than two" rate cuts. That prospect has reignited inflation worries and is pushing investors toward shorter-term bonds over longer maturities, which steepens the yield curve in the process, Major noted.
The Optimism Chorus
Trump isn't alone in his rosy outlook. Commerce Secretary Howard Lutnick is forecasting 6% GDP growth for the U.S. economy by 2026, crediting the president's policies for the anticipated boost. Meanwhile, Anthropic CEO Dario Amodei said last month that AI could propel the economy to grow by 5% to 10%, though he also cautioned that unemployment could climb as much as 10% in the process.
Whether any of these growth forecasts materialize remains to be seen, but one thing is clear: expectations for Warsh's potential Fed leadership are running extraordinarily high.
