Donald Trump has just nominated Wall Street veteran Kevin Warsh to be the next chairman of the US Federal Reserve, but his impressive CV wasn’t enough to tempt the Bank of England (BoE).

When the BoE was hunting for a successor to Mark Carney in 2019, Warsh came into the frame.

He had become a Fed governor at just 35, the youngest person ever to hold the post, and had connections everywhere after a career on Wall Street and in Washington.

Warsh actually moonlighted for the BoE in 2014, writing an agenda-setting report for Carney on reforming the Bank’s transparency practices and processes.

But in the end, the BoE chose an insider: Andrew Bailey. Warsh retreated to a life of academia, board directorships and informal economic counsel to Trump.

Warsh is unlikely to feel bitter about being overlooked by the Bank. Now, he has been handed an even bigger job: helming the US Federal Reserve.

The president announced on Friday that he was nominating Warsh to lead the central bank, writing on Truth Social that he could “go down as one of the GREAT Fed Chairmen, maybe the best”.

Traders and investors have cheered the appointment, with Warsh seen as one of their own: an Ivy League alumnus who cut his teeth on Wall Street.

Born in Upstate New York, Warsh studied economics and politics at Stanford University in California, then law at Harvard, before joining investment bank Morgan Stanley.

Evidently a high-flier, President George W Bush recruited him as an economic adviser in 2002 when Warsh was still in his early 30s, and then appointed him to the Fed’s board of governors in 2006.

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Ben Bernanke, who was Fed chairman at the time, described the young governor’s grasp of politics and markets as “invaluable” during the financial crisis. With his extensive network on Wall Street and in Washington, Warsh was intimately involved in shoring up the banking system.

But Warsh ultimately left the Fed on a sour note.

He wanted the Fed to stop propping up the economy sooner than many of his colleagues did and would reportedly fiercely argue his corner. After failing to win the argument, he ultimately resigned from the Fed in 2011, seven years before the end of his term.

This obstinate attitude helps to explain why markets are so relieved. Trump has spent the past year browbeating the Fed, particularly its chairman, Jerome Powell, to cut interest rates further and faster, despite concerns about inflation. That had led to fears that the president would install a puppet at the Fed who would dance to his tune.

Warsh not only has a track record of sticking to his guns but has also been “hawkish” on inflation – that is, he emphasises the importance of keeping price rises in check through higher rates.

“Warsh’s long-running hawkish views should help to counteract concerns that he might morph into a full-blown Trump stooge,” said Capital Economics’ Stephen Brown.

Although Warsh is unlikely to back Trump’s reflationary rate-cutting fervour, he has still made more of a case for cuts than Powell.

He says that artificial intelligence will drive down corporate costs, allowing businesses to keep prices lower. He also expects the Trump administration’s deregulation to help.

And, in words that would be music to Trump’s ears, he says the idea that a hot economy and labour market automatically fuel inflation is a “dogma”.

The real test of his fealty to Trump might come if, or when, the White House wants the Fed to intervene in the bond markets to keep the government’s borrowing costs lower.

Warsh is not a fan of the Fed throwing its financial weight around. He has often called for the Fed to shrink its balance sheet, not fatten it up by buying more bonds to keep yields lower.

He has also emphasised the importance of central bank independence, a principle that has been under heavy attack from the Trump administration.

Addressing a House of Lords committee in 2023, he said the Bank of England’s operational independence was “essential” and “a necessary prerequisite for the sound conduct of monetary policy”.

He added: “Independence granted by the Government demands a few other things. It demands that the central bank also acts independently without favour to any one side, calling it the best it can.”

That is what Powell has repeatedly said he has been doing at the Fed, only to find himself in the president’s sights.

Yet Warsh and Trump may find more common ground, thanks to a connection.

The Fed chairman-in-waiting is married to Jane Lauder, granddaughter and heiress of cosmetics queen Estee Lauder and is still employed in the family business. Lauder is worth an estimated $2.7bn.

Trump loves the billionaire class, and Ronald Lauder, Warsh’s father-in-law, is a Republican donor and a long-term friend of the president.

While Warsh and Trump are chummy for now, the question hanging over markets is whether the next Fed chief will show his fighting spirit if, or maybe when, he’s facing off against the president.

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