A shiny new Fed chair will be keen to start with an interest rate cut—but the bank is growing more hawkish due to Iran

In the entirely likely event that Kevin Warsh’s nomination for Fed chair makes it through Senate hearings, he’ll be keen to leave his first Federal Open Market Committee meeting this summer with a base rate cut in hand.

After all, in order to land the nomination to succeed Jerome Powell the directive from the Oval Office was explicit: The candidate would have to be more dovish than Powell. Warsh, a former Fed governor, fits the bill: He’s bullish on the U.S. economy, thanks in large part to the promise of AI, and is advocating for relative economic tightening on the Fed’s balance sheet to offset lower rates.

Trump’s campaign against Powell’s central bank has been intense—he literally brought it to the doorstep of the Fed. Any incoming Fed chair would be keen to set the tone early on, and deliver the much-requested rate cut the president has been lobbying for.

But to deliver that cut would be no mean feat. Trump’s military escapades with Israel in Iran are only likely to push an already skittish FOMC into a more hawkish stance, analysts believe. That’s because the biggest economic fallout from the conflict (notwithstanding the huma...