Top stories
- President Trump announced Kevin Warsh as his nomination to become the next Chair of the Federal Reserve. Warsh previously served on the board of the Fed in 2006-11 having been appointed by George W. Bush. Trump posted on Truth Social “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best.” Trump said Warsh was not committed to pushing for interest rates cuts, adding that he thought it would be “inappropriate” to ask the nominee such a question. Trump said they discussed it but, “I don’t want to ask him that question. I think it’s inappropriate. Probably would be allowed [to ask it], but I want to keep it nice and pure, but he certainly wants to cut rates. I’ve been watching him for a long time.”
- US and Iranian officials are expected to meet in Oman today in an effort to avoid escalation towards military confrontation. President Trump’s envoy, Steve Witkoff, and son in law, Jared Kushner, are expected to meet with Iranian foreign minister Abbas Araghchi. On Tuesday, the US shot down an Iranian drone that had “aggressively approached with unclear intent” the USS Abraham Lincoln aircraft carrier. The ship is part of President Trump’s “armada” sent to the Gulf to pressure Iran to agree new limits on its nuclear programme and to cut ties with regional proxy groups. Earlier in the week President Trump added “we are negotiating with them right now” and “they’d like to do something”.
- Both the Bank of England (BoE) and European Central Bank left interest rates on hold, as expected. The ECB’s Christine Lagarde continued with the narrative in place since last summer that “we are in a good place; inflation is in a good place”. Eurozone CPI in January was just 1.7%. The BoE vote was a 5-4 split – closer than expected and raising hopes for a rate cut as soon as March. Governor Andrew Bailey said his “main message is one of good news” with inflation expected to return close to the 2% target by April and stay there “nearly a year earlier than we expected in November”. Bailey said that this meant there “should be scope for some further easing” although “for every cut in Bank rate, how much further we go becomes a closer call”.
By the numbers
- 18% – the new ‘reciprocal’ tariff level imposed by the US on India, down from 25%. An additional 25% levy, imposed as punishment for India’s purchase of Russian oil, will be lifted altogether. The agreement came after a call between President Trump and Indian Prime Minister Narendra Modi after which Trump announced, “out of friendship and respect [they] agreed to a Trade Deal whereby the US will charge a reduced Reciprocal Tariff”. Trump claimed India had committed to a “Buy American” policy “worth over $500 billion”. India bought just $41.5 billion of goods from the US last year; it was not clear what will drive this additional spending.
- 4 days – the duration of the latest US government shutdown after funding ran out at the end of last month. The brief shutdown ended after the House of Representatives passed a bill by 217 to 214 votes. The bill has now been signed into law by President Trump and will fund several agencies until September and the Department of Homeland Security until 13 February. Despite the short-lived nature of the shutdown, the release of economic data has been delayed, including the key monthly payrolls data that was scheduled to be released today.
Market movers
The past week has seen significant volatility in precious metals prices, with gold and silver making the headlines with significant declines last Friday, admittedly on the back of a stellar performance run in recent months. To a closing high on 28 January, gold was up 25% this year, while silver was up 63%. Friday saw silver prices fall 26% while gold fell 9%. For some context, and after something of a recovery this week, gold is still up 12% this year, while silver is up 2%. This is on top of gains in 2025 of 18% for gold and 56% for silver.
Gold and silver are at the centre of the debasement trade, where investors worried about fiscal excess, geopolitics, tariffs, the erosion of value in fiat currencies and the independence of the central banks seek the haven of what is seen as a ‘safe’ asset. Central bank buying, retail demand and flows into exchange traded funds have all boosted prices. A degree of speculation is also inevitable, and indeed the recent rally, when prices have gone parabolic, has left both gold and silver vulnerable to large moves – and the removal of uncertainly over the Fed leadership appeared to be the catalyst for Friday’s sell-off. A Kevin Warsh-led Federal Reserve is seen as less vulnerable to risks of losing its independence, hence at the margin one of the reasons to buy gold became less compelling.
Investing or speculating in precious metals requires an acceptance that the asset will not pay any return other than hopefully delivering a capital gain on the basis that someone will want to pay more for it than you paid at some point in the future. There was clearly some ‘froth’ in prices in the build up to the sell off last week, but the dip buyers have been visible in the past few days, suggesting that the lustre of precious metals in the current uncertain environment remains in place.
The investment lens
After many months of speculation, in a process that felt at times like President Trump’s former life in TV show ‘The Apprentice’, we finally know his nomination for the next Fed Chair. Kevin Warsh, who previously served as a Fed Governor between 2006 and 2011, a period defined by the Global Financial Crisis, was seen as having hawkish views, and was a vocal critic of the Fed’s balance sheet expansion, both during and after the crisis. Warsh is seen as more of an orthodox and credible candidate than some of the others in the running, which has calmed worries over the Fed’s independence, but even he has become more dovish in his views on the path for interest rates. Indeed, given the President’s long held views that rates should be significantly lower, Trump would not have appointed Warsh if he wasn’t somewhat dovish in his outlook.
So, what will the Warsh-led Federal Reserve look like? It’s important to bear in mind that even though as Chair his opinion carries significant weight, his will be only one vote in a 12-member rate-setting committee, so Warsh cannot dramatically shift policy. All the same, given his views on balance sheet expansion, Quantitative Easing would appear to be off the menu. US inflation remains above target, but Warsh believes that deregulation and productivity gains from Artificial Intelligence will be disinflationary, wiping away lingering inflation. That may be wishful thinking, but for the moment, markets appear happy to give Warsh the benefit of the doubt. Time will tell however, if President Trump is happy with his choice…
