Why did new Fed Chairman Hsu promote two senior economists as advisers, and what’s the real agenda behind it?

According to a report by Nick Timiraos, a Wall Street Journal reporter and the Fed’s “whisperer,” Kevin Warsh, the newly appointed chairman of the U.S. Federal Reserve (Fed) who has been in office for just over a month, recently announced the appointment of two senior internal economists, Daniel Covitz and Eric Engstrom, to serve as his dedicated policy advisors. This staffing arrangement shows that as Warsh drives a series of sweeping internal reforms, he still leans on “veterans” with deep institutional experience to stabilize the central bank’s operational core.
(Background: U.S. Treasury Secretary Bessent Signals: Inflation Will Ease Back to the Target! Fed Chairman Warsh Will Balance Economic Growth and Price Stability)
(Background Supplement: Is Wall Street Misreading the Fed? Tom Lee: Warsh Is Extremely Dovish—Don’t Rush to Short! Warns of a “Quasi-Bear Market” Correction in the Second Half of the Year)

The power core of the U.S. Federal Reserve (Fed) is being reshaped at an accelerated pace. Kevin Warsh, the new Fed chairman who only officially took the helm last month, is actively building his own core think tank. According to the latest reports from the Wall Street Journal and MSN, Warsh has formally appointed two senior central bank economists who have served within the Fed system for many years, providing key support for his future policy analysis and strategic planning.

Elevating internal veterans to steady the ranks of monetary policy

Both of these newly appointed advisors are heavyweight, senior officials well-versed in the Fed’s internal operating mechanisms:

• Daniel Covitz: Formerly served as one of three Deputy Directors of the Federal Reserve Board’s “Division of Research and Statistics,” a core unit that supports the Fed’s economic forecasts and policy-making.
• Eric Engstrom: Previously served as a senior deputy in the “Division of Monetary Affairs,” with extensive practical experience in open market operations and the monetary policy transmission mechanism.

Analysts point out that in the early days after taking office, it is a long-standing tradition for a new Fed chairman to pick one or two senior economists from existing or former staff to serve as close advisors. This helps the new chairman quickly connect with the massive bureaucracy, and also sends the market signals of policy continuity and stability.

External reform and internal stability move in parallel, reshaping the Fed framework

However, this traditional internal personnel appointment must be viewed in the context of Warsh’s broader reforms. In fact, Warsh has demonstrated a very strong reform drive since taking office. Not long ago, he made an overhaul-style announcement to set up five specialized task forces, with the goal of comprehensively reexamining the Fed’s external communication approach, its data analysis framework, and its management strategy for a large asset portfolio (Asset portfolio).

In addition, the market has not forgotten that in early June, Warsh took an unconventional step: appointing external conservative policy expert Paul Winfree (who previously participated in writing the Fed reform chapter of the conservative blueprint “Project 2025”) and Daniel Heil to serve as his “temporary advisors.”

This move of bringing Covitz and Engstrom—two homegrown, institutional veterans—into his fold is being seen on Wall Street as a shrewd balancing strategy. Warsh clearly wants to introduce external conservative thinking to push radical reforms, while also relying on these internal experts who are familiar with the mechanisms to ensure the precision of policy execution and avoid unnecessary turbulence as the central bank transitions.