Trump nominee Kevin Warsh signals shift to 'monetary sovereignty' at Fed

Kevin Warsh, a potential successor to Jerome Powell as Federal Reserve chair, has indicated a policy shift toward 'monetary sovereignty' that could reduce global liquidity and pressure US dollar-driven assets, according to analysts at China International Capital Corporation (CICC). In remarks to the Senate Banking Committee, Warsh said he would work with the US Treasury to shrink the Fed's balance sheet, reiterating concerns about its size. CICC analysts noted that changing market expectations often precede policy adjustments and warned that assets reliant on abundant dollar liquidity could face headwinds. However, Citic Securities analysts argued that implementing such an agenda would take time, predicting a gradual pace even if balance sheet reduction begins in the second half of the year. The Trump administration has also threatened the current Fed chief with criminal indictment.