The new Federal Reserve Chair Kevin Warsh may not take an extremely tightening approach! Evercore ISI Vice Chairman: Wausu is more like a "pragmatic conservative"

After Kevin Warsh was nominated to become Federal Reserve Chair, the market quickly responded with a “hawkish” tone, triggering asset price volatility. However, Evercore ISI analyst Krishna Guha pointed out that Warsh may not be as hawkish as widely perceived, suggesting a need to reassess this policy expectation shift.
(Background: Formerly appointed by Trump, Fed Chair Kevin Warsh on Bitcoin: It’s not a dollar substitute but a “supervisor” of monetary policy)
(Additional context: 10x Research warns: If Kevin Warsh leads the Federal Reserve, it could be unfavorable for Bitcoin)

Table of Contents

• Market Immediate Reaction: Rising Yields, Falling Gold Prices
• Guha’s View: Warsh as a “Pragmatic Conservative”
• Balance Sheet Stance: Supports Quantitative Tightening but Not Aggressive Action
• The Fed Under Political Pressure: Consensus Decision-Making Remains Central

After President Trump nominated Kevin Warsh as Fed Chair, the market quickly exhibited typical hawkish expectations. However, Krishna Guha, Vice President at Evercore ISI, offered a different perspective, suggesting the market may be overinterpreting Warsh’s policy stance. Guha noted that Warsh is unlikely to be the hardline hawk many assume; instead, he appears to be a pragmatic, balanced conservative decision-maker.

Market Immediate Reaction: Rising Yields, Falling Gold Prices

Today (12th), Walter Bloomberg reported via X that following Warsh’s nomination announcement, U.S. Treasury yields increased and gold prices declined, indicating market expectations that the new chair might adopt a more aggressive stance on inflation, possibly accelerating the reduction of the Fed’s balance sheet.

This reaction reflects investor concerns about a “hawkish policy shift.” Since Warsh has previously been labeled as hawkish on inflation, the market naturally associates his appointment with a tighter monetary environment. However, Guha suggests that this price movement may be based on an oversimplified impression.

WARSH MAY NOT BE THE FED HAWK MARKETS EXPECT

Kevin Warsh’s reputation as a hardliner on inflation may be overstated, according to Evercore ISI’s Krishna Guha. While his nomination initially pushed yields higher and gold lower, Guha says Warsh is better seen as a pragmatic… pic.twitter.com/JZHiCpIS7n

— *Walter Bloomberg (@DeItaone) February 12, 2026

Guha’s View: Warsh as a “Pragmatic Conservative”

Krishna Guha emphasized that Warsh’s hawkish image might be exaggerated by the market. He pointed out that Warsh’s policy thinking leans more toward distinguishing the sources of inflation rather than adopting a blanket tightening approach.

In the current environment, if inflation stems from positive supply-side factors—such as the expansion of AI applications and productivity gains—Warsh might demonstrate greater policy flexibility. These supply-side factors could help ease price pressures and reduce the necessity for aggressive rate hikes or rapid balance sheet reduction.

In other words, Warsh is not mechanically fighting inflation but is more focused on structural inflation and underlying economic fundamentals.

Balance Sheet Stance: Supports Quantitative Tightening but Not Aggressive Action

Warsh has long advocated for reducing the Fed’s balance sheet, believing that an excessively bloated balance sheet is detrimental to long-term economic stability. However, Guha noted that supporting balance sheet reduction does not necessarily mean pushing for aggressive tightening.

He suggests Warsh is more likely to adopt a gradual and predictable adjustment path to avoid market turmoil and maintain policy credibility. This means that even if the policy moves toward normalization, the process will emphasize stability and communication rather than abrupt shifts.

The Fed Under Political Pressure: Consensus Decision-Making Remains Central

In the current context, there is heightened concern about the Fed’s independence. Guha expects that even with a new chair, the Federal Open Market Committee (FOMC) will continue to prioritize consensus decision-making.

The Fed’s institutional design emphasizes collective judgment and independence, which helps prevent policy from swinging to extremes based on individual leadership styles. Therefore, even if Warsh takes office, its policy trajectory will still need to be shaped within the FOMC’s consensus framework.

Overall, Krishna Guha’s analysis offers a different perspective: Kevin Warsh may not be the hawkish hardliner widely assumed, but rather a decision-maker seeking a balance between supporting economic growth and controlling inflation.

If this view holds, investors should reconsider the sources of inflation, the pace of policy adjustments, and the Fed’s institutional framework to better understand future monetary policy directions.