President Trump’s Fed nominee Kevin Warsh could cut interest rates hard and fast, an economist who correctly called Japan’s fiscal policy issues said Tuesday, belying 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, forecasts 100 basis points of cuts over the four meetings in June, July, September and October after Warsh’s appointment, he said in his latest analysis on Tuesday.
“This could be portrayed as a resetting of monetary policy to recognize a lower neutral rate and far exceeds the roughly 40 basis points of cuts that market prices over this period set 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 when interest rates on the country’s public borrowing costs rose to record highs.
His latest forecast means the Fed’s benchmark lending rate could fall to a range of 2.5%-2.75% from the current 3.5%-3.75% before the midterm elections in November.
Incumbent Chairman Jerome Powell’s term ends in May. Last month, the Powell-led Fed kept interest rates steady in a range of 3.5%-3.75% after cutting by 75 basis points over the previous three meetings.
This projection of aggressive rate cuts could reignite a bull run in bitcoin and the broader crypto market. Warsh’s hawkish past as Fed governor, when he clung to his anti-inflation stance through the 2008-09 crisis, has spooked markets into believing interest rates will not fall easily under his presidency, setting up another clash between the central bank and the White House. Trump has repeatedly attacked Powell for not cutting interest rates aggressively to 1% and killing the US economy.
The way markets have reacted since murmurs of a Warsh presidency began circulating late Thursday reveal the anxiety. Bitcoin plunged from $84,500 on Thursday to below $75,000 over the weekend as hawkish Fed fears fueled high risk aversion. Gold and silver fell 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 cannot and will not be. In fact, his worst nightmare is likely to have Trump turn on him as 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 boosts productivity and strengthens American competitiveness.
“Productivity improvements should drive substantial increases in real household wages. A one-percentage-point increase in annual productivity growth would double living standards within a single generation,” Warsh noted in a November 2025 Wall Street Journal op-ed titled “The Federal Reserve’s Broken Leadership.”
