President Trump’s Federal Reserve nominee Kevin Warsh is likely to cut interest rates sharply and quickly, an economist who correctly described Japan’s fiscal problems said Tuesday, contradicting concerns about a slowdown in so-called liquidity easing under the incoming chairman.
Robin Brooks, senior fellow at the Global Economics and Development Program at the Brookings Institution, said in the latest analysis on Tuesday that he expects 100 basis points of rate cuts at four meetings in June, July, September and October following Warsh’s appointment.
He added: “This can be described as a reset of monetary policy to acknowledge a lower neutral rate and go well beyond the roughly 40 basis points of rate cuts that the market had expected for this period, setting the stage for further dollar weakness.”
Brooks has been warning of a full-blown fiscal crisis in Japan for at least a year, and early signs of the crisis emerged last month as yields on the government’s borrowing costs surged to record highs.
His latest forecast means the Fed’s benchmark borrowing rate could fall to 2.5%-2.75% from the current 3.5%-3.75% ahead of the November midterm elections.
Current Chairman Jerome Powell’s term ends in May. Last month, Powell’s Fed held rates steady in a range of 3.5% to 3.75% after cutting rates by 75 basis points in its first three meetings.
This prediction of a big rate cut could revive Bitcoin’s bull run and the broader cryptocurrency market. Warsh’s hawkish past as a Fed governor, which included an anti-inflation stance during the 2008-09 crisis, raised concerns that interest rates would not easily fall on his watch, sparking another conflict between the Fed and the White House. Trump has repeatedly attacked Powell for not cutting interest rates significantly to 1%, thereby strangling the U.S. economy.
The anxiety has been revealed in the way markets have reacted since chatter about Warsh’s presidency began circulating late Thursday night. Bitcoin plummeted from $84,500 on Thursday to under $75,000 over the weekend as concerns about a hawkish Federal Reserve added to key risk-off sentiment. Gold and silver fell 9% and 26% respectively on Friday, while the U.S. dollar index rose.
Brooks noted: “Many people last week mistakenly believed that Warsh would become hawkish. He cannot and will not. In fact, his worst nightmare may be to have Trump attack him the same way he did Powell.”
He expects Warsh to solidify the high-productivity, low-inflation narrative and lower interest rates, which is certainly possible because Warsh sees the AI boom as a deflationary force that could boost productivity and enhance U.S. competitiveness.
In a November 2025 Wall Street Journal op-ed titled “The Fed’s Failed Leadership,” Warsh argued that “productivity gains should drive substantial increases in real take-home wages. Every percentage point increase in annual productivity growth doubles living standards within a generation.”
