Trump expects his Fed chair nominee to cut interest rates. Here’s how Kevin Warsh might try to do it.

President Trump’s pick for Fed chair, Kevin Warsh, may argue that shrinking the Fed’s $6.6 trillion balance sheet can be used to justify lower short-term interest rates — effectively converting about $1 trillion of balance-sheet reduction into the economic equivalent of a 50-basis-point move and helping him press for as much as 100 basis points of cuts overall. Economists warn markets would be skeptical: selling assets outright would likely tighten financial conditions and hit risk assets, while the more likely path — reducing reserve demand and letting assets run off — would be slower and politically fraught. Markets would watch any plan closely because of its potential to alter yields (the Fed holds about $1.6 trillion in long Treasurys and $1.9 trillion in MBS), inflation risks and timing (Powell’s term ends in May). Overall, the article signals uncertainty and market skepticism about whether Warsh could successfully translate balance-sheet policy into imminent rate cuts.