Donald Trump says he will appoint Kevin Warsh as chairman of the Federal Reserve, backing a prominent policymaker to lead the US central bank at a time when it is facing one of the worst tests of its independence.

In a post on his Truth Social platform on Friday, the US president wrote: “I am pleased to announce that I have chosen Kevin Warsh to be CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.”

He added: “I have known Kevin for a long time, and there is no doubt that he will go down as one of the GREAT Fed Chairmen, perhaps the best. Above all, he is ‘central casting,’ and he will not let you down. Congratulations Kevin!”

Warsformer Fed governor, will replace Jay Powell when his term as Fed chair ends in May, subject to Senate approval.

The Stanford academic and partner in billionaire investor Stanley Druckenmiller’s family office is well regarded on Wall Street and his nomination will ease concerns about the president’s relentless pressure campaign to force the Fed to lower borrowing costs.

Trump’s decision to nominate Warsh, 55, caps the most contentious race to lead the world’s most important central bank in recent memory. It comes at a time when economic growth is strong, but inflation remains high and the job market shows signs of cooling after years of strong hiring.

Warsh, who served as a feeding governor during the 2008 financial crisis, echoed Treasury secretary Scott Bessent’s calls for an overhaul of Fed management, calling for “regime change” at the central bank.

However, some see him as a long shot because his calls to shrink the Fed’s balance sheet could conflict with the president’s demands for low rates. Long-term US borrowing costs and the US dollar both rose in early trading in New York on Friday.

Warsh has already interviewed for the top job once, in 2017, when Trump picked Powell, a man he quickly clashed with and has since labeled a “moron” and “stubborn mule” for his reluctance to cut rates.

Warsh’s candidacy received a boost after bond investors and Wall Street executives expressed concerns that the man who has long been his closest rival, White House economist Kevin Hassett, will lower rates indiscriminately.

Jamie Dimon, the chief executive of JPMorgan Chase, signaled his support for Warsh, while Citadel’s Ken Griffin warned the president that choosing a close ally for the job could hamper the Fed’s ability to fight inflation.

A late show of support for BlackRock executive Rick Rieder fizzled amid concerns over the bond market veteran’s donations to top Democrats and Trump’s Republican opponent Nikki Haley.

Warsh established his Wall Street contacts in 2008, when he acted as a conduit between Fed officials and investors, helping guide the central bank’s response to one of the worst crises since the Great Depression.

He has since criticized elements of that response, arguing that the Fed’s balance sheet has become bloated after massive bond purchases under successive quantitative easing programs.

Warsh shares Bessent’s view that the Fed has strayed beyond its original remit, becoming too powerful and taking actions that blur the lines between monetary policy and fiscal policy.

If he is confirmed by the Senate, Warsh will assume the top post at a central bank that is divided over whether to prioritize battling persistently high inflation or seek to shore up a sagging job market.

The Fed has cut rates three times by 2025, bringing US borrowing costs to three-year lows. However, central bank officials continued to hold borrowing costs this week and offered very different assessments of the path to monetary policy in 2026.

Stephen Miran, a Trump ally who joined the Fed in September, said rates should be much lower, arguing that “phantom inflation” caused by housing prices and other measures is distorting the central bank’s decisions.

Two of the regional Fed presidents who sit on the central bank’s rate-setting board – Lorie Logan, of the Dallas Fed, and her counterpart in Cleveland, Beth Hammack – strongly opposed further rate cuts.

The challenge facing the Fed intensified this month after US prosecutors launched a criminal investigation into Powell’s $2.5bn renovation of the central bank’s headquarters.

The investigation drew a sharp rebuke from Powell, who said it was part of a series of threats from the White House intended to curb the Fed’s independence in setting interest rates.

A Senate backlash against the investigation, including Republicans on the influential banking committee, could complicate the former Fed governor’s nomination.

Some Republican senators, led by Thom Tillis of North Carolina, said they would not proceed with Trump’s choice until the Department of Justice dropped the Powell investigation.

However, Warsh has relatively strong contacts on Capitol Hill and support from traditional Republican lawmakers from his previous stint on the Fed board, which should help him win approval.

Warsh’s capacity to reform the Fed could also be threatened by Powell’s decision on whether he will remain on the board until his term as governor ends in January 2028. The pending Supreme Court decision on whether to allow Trump to fire governor Lisa Cook could also be a key moment in shaping the future of the central bank.