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Market observers have recently raised a sharp question: if Kevin Wash becomes the Federal Reserve Chair, will he be a steadfast hawk on inflation or a follower of political winds? Behind this question lies a deep concern about the direction of U.S. monetary policy and even global financial stability.

A long-time macroeconomic analyst focuses on this Trump-selected candidate. He attempts to discern potential future policy paths from Wash’s past remarks and recent subtle shifts in stance. The core contradiction is that Wash displays a tough anti-inflation position on one hand, yet his recent downplaying of inflation threats coincides with Trump’s preference for easing.

This internal contradiction is seen by commentators as a potential risk source. They warn that under Wash’s possible policy framework, the ultimate outcome might be another financial crisis.

Looking back to 2010, when the U.S. economy was still struggling in the aftermath of the financial crisis, Wash, in a speech, already expressed concerns about the Fed’s credibility. He put forward several core views: the Fed’s independence should be limited to monetary policy; the central bank should resist becoming the ultimate rescuer; the government might pressure the Fed to maintain easing for debt financing; and, that low inflation achieved over decades should not be risked.

These views, in the economic environment of that time, appeared particularly strict, almost doctrinal.

Fast forward to 2025, on the surface, Wash’s intellectual stance seems consistent. In a speech, he criticized the Fed for “institutional drift,” failing to fulfill its core responsibility of price stability. He accused the Fed of fueling explosive growth in federal spending and sharply pointed out that since 2008, the Fed has become the most important buyer of U.S. debt.

He believes the real danger is not the traditional “fiscal dominance,” but “monetary dominance,” where the central bank becomes the final arbiter of fiscal policy.

This raises a confusing question: why would Trump, who has criticized Chair Powell for not cutting rates fast enough, choose someone seemingly hawkish on inflation? Several possibilities are analyzed: admiration for Wash’s hostility to Fed overexpansion; a preference for his financial deregulation stance; and, that Wash’s relatively orthodox approach could reassure markets.

But the key point is that Wash “coincidentally” believes that due to productivity growth driven by technology, inflation is no longer a threat. For someone who worried about inflation during a deep recession, this is a bold shift. Commentators note that this is akin to replacing the Fed’s “data dependence” with intuition. In the context of massive deficits, high debt, and rapid economic growth in the U.S., this is a high-stakes gamble.

The commentator admits he agrees with some of Wash’s criticisms of the Fed, especially regarding its deviation from core functions. He also believes that post-pandemic inflation was partly due to the Fed, and that the monetary policy framework introduced in 2020 has conceptual and practical issues. Meanwhile, as a large institution, the Fed’s decisions are not solely controlled by the chair, providing some institutional buffers.

However, concerns remain focused on two points. First, Wash might be overly willing to defend any policy Trump desires, even if it means fully embracing fiscal dominance. Second, he might attempt a contradictory maneuver: actively shrinking the Fed’s balance sheet while offsetting lower short-term rates with higher long-term rates.

Meanwhile, the U.S. Treasury is likely to further shift toward short-term financing. This combination could steepen the U.S. yield curve, increase short-term dollar funding needs, and reduce long-term demand.

The analyst warns that the most important issue is that, given the decline in bank reserves and financial deregulation, the assets and liabilities of the financial sector will become more fragile. The motivation to hold dollars could also weaken due to rising inflation fears caused by falling short-term rates. His conclusion is sobering: “The result could be another financial crisis.”

History repeatedly shows that financial crises often stem from policy internal contradictions: on one side, fiscal expansion and deregulation; on the other, attempts to maintain monetary discipline, ultimately leading to systemic risks accumulating in the shadows.

In conclusion, the analyst offers a cautious assessment of Wash: he’s better than many other candidates, but he is a confusing figure—perhaps even self-conflicted. A central banker with an inconsistent stance might be more dangerous than one with a firm but wrong position, because markets cannot form stable expectations.

He emphasizes that the U.S. and the world need a Fed Chair who can say “no” to the president. He believes Powell has already demonstrated this. The unresolved question is: will Wash be that person? The answer may only be revealed during the next economic or financial upheaval, but by then, the cost may already be paid.

Wash once said in 2010 that the only reputation central bankers should seek is to be remembered in history books. The question is whether he will be remembered for maintaining financial stability or for triggering the next crisis. For the highly liquidity-dependent and risk sentiment-driven crypto markets, especially $BTC and $ETH, the answer to this question will directly determine whether they become safe havens during a crisis or assets to be sold off in liquidity crunches.

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