Kevin Warsh’s nomination to lead the Federal Reserve is unlikely to result in fast or far-reaching policy changes, despite his reputation as a hawk, according to Bank of America.
BofA rates strategist Mark Cabana said Warsh would likely adopt a more hawkish stance on balance sheet policy, while still supporting interest rate cuts in the near term. In his view, Warsh may seek adjustments rather than a full overhaul of existing monetary policy.
Bank of America expects Warsh to favor a smaller, shorter-duration balance sheet focused solely on U.S. Treasuries, but does not anticipate a reversal of the Fed’s reserve-management purchases. Any changes to the balance sheet, the bank suggests, would likely be incremental.
Cabana also highlighted Warsh’s long-standing views on institutional reform. Warsh has been a vocal critic of what he describes as “mission creep,” arguing that the central bank should reduce its involvement in areas such as climate policy and inclusive employment initiatives.
In addition, Warsh has questioned the Federal Reserve’s heavy reliance on short-term economic forecasts. In an April 2025 speech, he dismissed the current emphasis on “data dependence,” warning that policymakers risk becoming overly constrained by their own published projections. Bank of America noted that this could translate into efforts to scale back or reduce the frequency of the Fed’s Summary of Economic Projections.
However, BofA believes internal resistance could significantly limit the scope of any reforms. The bank said it would be challenging for Warsh to gain broad support within the Federal Open Market Committee, pointing to the lack of dissent around recent balance-sheet decisions.
While Warsh may succeed in curbing what he sees as institutional overreach, Bank of America remains skeptical that policymakers will accept reduced transparency or a diminished role for economic forecasts. Overall, the bank expects any policy shift under Warsh to be gradual rather than transformative.
