What to know : Trump's Fed pick Warsh to slash rates by 100 basis points before the mid-term elections, economist Robin Brooks who correctly predicted Japan's fiscal issues said Tuesday. Rapid easy could send the dollar lower and turbocharge the crypto bull market. Bitcoin, gold and silver plunged late last week as fears gripped markets that Warsh will be slow to cut rates.
President Trump's Fed nominee Kevin Warsh could cut rates hard and fast, an economist who correctly called Japan's fiscal issues said Tuesday, contradicting fears of slower so-called liquidity easing under the incoming chair.
Robin Brooks, senior fellow in the Global Economy and Development program at the Brookings Institution, predicts 100 basis points of cuts over the four meetings in June, July, September and October following Warsh's appointment, he said in his latest analysis Tuesday.
"This could be portrayed as a reset of monetary policy to acknowledge a lower neutral rate and far exceeds the roughly 40 basis points in cuts that markets price over this period, setting the stage for more dollar weakness," he added.
Brooks has consistently warned of a full-blown fiscal crisis in Japan for at least a year, with early signs of crisis emerging last month as yields on the nation's government borrowing costs surged to record highs.
His latest forecast means the Fed's benchmark borrowing rate could drop to a 2.5%-2.75% range from the current 3.5%-3.75% before November's mid-term elections.
Incumbent Chair Jerome Powell's term ends in May. Last month, the Powell-led Fed held interest rates steady in a range of 3.5%–3.75% after cutting by 75 basis points over the three previous meetings.
This projection of aggressive rate cuts could revive a bull run in bitcoin and the wider crypto market. Warsh's hawkish past as a Fed governor, when he clung to his anti-inflation stance through the 2008-09 crisis, has scared markets into thinking rates won't fall easily under his presidency, setting up another clash between the central bank and the White House. Trump has repeatedly attacked the Powell for not cutting rates aggressively to 1% and killing the American economy.
The way markets have reacted since murmurs of the Warsh presidency began circulating late Thursday reveals the anxiety. Bitcoin plunged from $84,500 Thursday to under $75,000 over the weekend, with hawkish Fed fears fueling major risk aversion. Gold and silver tanked by 9% and 26%, respectively, on Friday, while the dollar index rose.
"Many came away from last week with the mistaken impression that Warsh will be hawkish. He can't and won't be. In fact, his worst nightmare is probably to have Trump turn on him like he did on Powell," Brooks noted.
He expects Warsh to cement a high-productivity, low-inflation narrative for lower rates, which is certainly possible as Warsh sees the AI boom as a disinflationary force that increases productivity and bolsters American competitiveness.
"Productivity improvements should drive significant increases in real take-home wages. A one-percentage-point increase in annual productivity growth would double standards of living within a single generation," Warsh noted in a November 2025 Wall Street Journal op-ed titled "The Federal Reserve's Broken Leadership."
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