A three-way race is expected for the successor to Jerome Powell, the Chair of the US Federal Reserve (Fed), whose term ends in May next year. As President Donald Trump, who has consistently advocated for interest rate cuts, encourages a "loyalty contest" among the candidates, it is anticipated that the appointment will be someone closely aligned with his preferences. The leading candidate is Kevin Hassett, Chair of the White House National Economic Council (NEC), closely followed by former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller.
Powell, Who "Does Not Listen to Trump," Will See His Term End in May Next Year
According to foreign media and online betting sites, Kevin Hassett is expected to be nominated as the next Fed Chair among the four candidates. As of 4 p.m. on the 19th, online betting site Kalshi put Hassett's nomination probability at 52%, followed by former Governor Warsh at 27% and Governor Waller at 15%. Rick Rieder, Chief Investment Officer (CIO) of Global Fixed Income at BlackRock, is also in the final pool, but his presence is considered minimal compared to the other three.
Chairman Hassett is one of President Trump's closest aides and a long-standing economic advisor. Having served as Chair of the White House Council of Economic Advisers (CEA) during Trump's first term, he made a prominent return for the second term. He has supported President Trump's stance on Fed policy and has criticized the Fed, saying it is "undermining its own independence and credibility." Although he is an economist from the American Enterprise Institute (AEI), a Republican think tank, and has advocated for free trade, he has shown the opposite stance under the Trump administration, drawing controversy. He previously served as an economic advisor to former President George W. Bush, the John McCain campaign, and the Mitt Romney campaign.
Hassett Leads as the Front-Runner Due to Expected Loyalty
One reason the market views Hassett's chances favorably is his resume. Anna Wong, an economist at Bloomberg Economics, wrote in an analysis on the 15th, "Three out of the last four Fed Chairs previously served as CEA Chair, so Hassett's background matches the typical career path of Fed Chairs." She also noted that three out of the four had Republican political leanings, highlighting another commonality.
Another candidate, former Governor Warsh, has the unique distinction of being the youngest Fed Governor from Wall Street. He recently received official support from Jamie Dimon, Chairman of JPMorgan Chase, known as the "Emperor of Wall Street." In Korea, he is well known as an outside director of Coupang. He was appointed as the youngest Fed Governor at age 35 during the Bush administration and played a key role in monetary policy decisions during the financial crisis. He also served on President Trump's economic advisory team and competed with Powell for the Chair position in 2017. Notably, Warsh's wife, Jane Lauder, is the granddaughter of the founder of the global cosmetics company Est?e Lauder. Considering President Trump's personal preference for influential networks, this could work in Warsh's favor.
Warsh, Youngest Fed Governor from Wall Street, Also in the Running
There is also a third variable. Governor Waller, appointed during the first Trump administration, has been a professor for over 20 years and is known as a "dove" who favors accommodative monetary policy. At the Federal Open Market Committee (FOMC) meeting in July, where rates were held steady, he reportedly voiced a minority opinion advocating for a rate cut. In a survey conducted by The Wall Street Journal (WSJ) in October, he was selected as the most preferred candidate by economists. On Wall Street, he is considered the most logical advocate for rate cuts and is seen as someone who can mediate internal disagreements within the Fed.
President Trump has made "loyalty" to himself the core criterion for selecting the next Chair. He has repeatedly criticized Chair Powell and stated that he could nominate a successor before the end of the year. Referring to Powell, Trump said, "Right now, we have someone who is not smart at all," and added, "He should have delivered much faster and much lower rates." Trump has consistently argued that the Fed's rate responses have been too slow and is expected to maintain this stance next year.
President Trump's history of harsh criticism toward Powell is well known. Since his appointment during Trump's first term, Powell has been at odds with the President. In August, Trump posted on his social media platform Truth Social, "The stubborn fool, 'too slow' Powell, must immediately slash rates," threatening to push for Powell's dismissal by the Fed Board if he refused. According to WSJ, it was Treasury Secretary Scott Bessent who prevented such actions, but Trump countered, "That's a typical lie. No one needs to explain anything to me."
Given President Trump's tendencies, the market is concerned that the Fed's political independence could be compromised. Ironically, what has held back Hassett, whom Trump openly called a "strong candidate," is his loyalty to Trump. In early December, over 80% of observers predicted Hassett's appointment. To dispel market concerns, Hassett clarified, "The President will reject the idea that being friends with him disqualifies me from being Chair." Governor Waller, when asked a similar question, stated, "I will absolutely defend the Fed's independence."
Waller Is Also a Variable... Concerns Over Fed Independence
Regardless of who becomes the next Chair, it is expected that the FOMC will remain divided between "hawks" (favoring monetary tightening) and "doves" (favoring easing). For example, at the December FOMC, the vote to cut rates was nine in favor and three against. It was the first time since September 2019 that three members voted against the majority. Given the Fed's usual preference for unanimous decisions, this was considered "unusual."
The selection of the new Chair is expected to be finalized soon. Hassett and Warsh have already completed interviews with the Trump administration, and Waller finished his interview last weekend. As reports indicate that Waller's interview was "successful," he is increasingly seen as a "dark horse." According to US financial media outlet CNBC, CIO Rieder is scheduled to be interviewed at President Trump's Mar-a-Lago residence in Florida during the last week of this month. Michelle Bowman, a Fed Governor who was initially considered a candidate, has reportedly been excluded from the final shortlist.
The WSJ analyzed, "The next Chair to be nominated by President Trump is likely to fill the seat of Fed Governor Stephen Miran, whose term expires on January 31 next year." This would allow Trump to have the new Chair participate in the key rate-setting meetings in March and April, ahead of the official term starting in mid-May. There are three FOMC meetings left until Powell's term expires in May next year, scheduled for January, March, and April. However, even after his term as Chair ends, Powell will remain a Fed Governor until January 2028.
