The final selection of the next Federal Reserve Chairman is nearing completion.
On December 1, Nick Timiraos, a Wall Street Journal reporter often referred to as the Federal Reserve's "mouthpiece," reported that although interviews for Federal Reserve chairman candidates are still ongoing, Trump has already "preferred" his longtime advisor, Kevin Hassett, director of the White House National Economic Council. Hassett meets Trump's two main criteria for hiring: loyalty and market approval.
According to Xinhua News Agency, U.S. President Trump said in a media interview on November 30 that he had finalized his choice for the next Federal Reserve Chairman, but did not reveal who it would be.
On November 25, Bloomberg reported that Hassett was leading the race for the next Federal Reserve Chair and was expected to receive the final nomination. Subsequently, online betting site Polymarket showed that Hassett's probability of winning began to rise sharply, clearly ahead of other candidates. As of press time, Hassett's probability of winning was 78%.
Following rumors that Hassett was likely to win, U.S. Treasury bonds rose on November 25, with the 10-year Treasury yield falling below 4% for the first time in nearly a month.
"Judging from the market reaction, this news has triggered a positive response—the Treasury auctions performed well, and interest rates have subsequently fallen," Hassett said on November 30, referring to rumors about himself. He added that the American people can expect President Trump to appoint a Federal Reserve chairman who can bring them tangible benefits, such as lowering auto loan rates and allowing people to obtain mortgages at lower interest rates.
U.S. Treasury Secretary Bessant stated that Trump is "very likely" to announce his nominee for the next Federal Reserve Chairman before Christmas, December 25th. Current Fed Chairman Powell's term will end in May 2026.
Besides Hassett, other candidates for the next Federal Reserve Chair include Federal Reserve Governors Christopher Waller and Michelle Bowman, former Federal Reserve Governor Kevin Warsh, and BlackRock. Executive Rick Rieder. Trump had also considered Bessant as Treasury Secretary, but Bessant made it clear that he had no intention of taking the position.
As the mystery nears its end, how did Hassett manage to take the lead? And what challenges will he face if he ultimately wins?
Conservative economist, a close confidant of Trump
Compared to other candidates, Hassett's biggest advantage may be his closer relationship with Trump, which makes him more likely to gain Trump's trust.
Hassett is a member of Trump's inner circle. During Trump's first term, Hassett held two key positions. First, from 2017 to 2019, he served as Chairman of the Council of Economic Advisers. After the outbreak of the pandemic in 2020, Hassett briefly returned to the White House, serving as a senior advisor for nearly three months, advising Trump on economic policies during the pandemic. Afterward, Hassett joined the private equity firm founded by Trump's son-in-law, Jared Kushner. In 2025, after Trump begins his second term, Hassett will serve as Director of the National Economic Council, responsible for coordinating and formulating major economic policies.
Hassett is also a highly experienced economist within the Republican advisory circle. Besides advising Trump, Hassett has frequently served as an economic advisor to other Republican candidates in US presidential elections over the past two decades. In the 2000 election, Hassett served as chief economist for Republican primary candidate McCain; in the 2004 election, he served as an economic advisor to Republican presidential candidate George W. Bush; in the 2008 election, he served as a senior economic advisor to Republican presidential candidate McCain; and in the 2012 election, he served as an economic advisor to Republican presidential candidate Mitt Romney.
Hassett holds a PhD in Economics from the University of Pennsylvania. From 1989 to 1993, he served as an Assistant Professor at Columbia Business School, becoming an Associate Professor in 1993. From 1992 to 1997, Hassett worked at the Federal Reserve Board of Research and Statistics, serving successively as an economist and senior economist. In 1997, Hassett joined the American Enterprise Institute, a conservative think tank, as a resident scholar. His research areas include tax policy, fiscal policy, energy issues, and stock market investment.
Can the president's trust and the Federal Reserve's independence be achieved simultaneously?
Although Hassett hinted in an interview that the market's reaction to the rumors indicated market acceptance of his role as Federal Reserve Chairman, his ability to maintain the Fed's independence remains to be seen. The Fed's independence is considered the cornerstone of its credibility and a crucial condition for the effectiveness of its monetary policy.
Hassett stated in an interview that the Federal Reserve Chairman needs to be completely independent of political influence and also independent of Trump. Can he live up to his word and withstand Trump's relentless attacks like Powell did?
Jerome Powell was nominated by Trump as Federal Reserve Chairman during his first term and took office in February 2018. However, Trump and Powell were not on the same page, and their "battle" over monetary policy was already quite intense during Trump's first term. Trump, a real estate developer, favored low interest rates. When the Fed raised rates, Trump opposed them; when the Fed lowered rates, Trump believed the cuts were too small and too slow.
Only after the outbreak of the pandemic in 2020, when the Federal Reserve directly implemented a "zero interest rate," did Trump show any satisfaction with the Fed.
Since beginning his second term this year, Trump has quickly launched a "tariff war." This tariff war has increased the risk of a rebound in inflation and slowed the Federal Reserve's pace of interest rate cuts. This, in turn, has provoked strong dissatisfaction from Trump. Trump has repeatedly threatened to "fire" Powell, but Powell has remained unmoved.
Hassett's views on the economy are closer to Trump's. In a November 20 interview, he stated, "We should cut interest rates immediately." He has also criticized Powell for not being aggressive enough in cutting rates, citing partisan reasons. This means that Hassett differs from most current Federal Reserve policymakers.
Can the internal divisions within the Federal Reserve be bridged?
If Hassett becomes the head of the Federal Reserve, it remains to be seen whether he can bridge the internal divisions within the Fed.
The Federal Reserve's monetary policy is set by the Federal Open Market Committee (FOMC). The committee consists of 12 members, including 7 members of the Federal Reserve Board of Governors, 1 president of the New York Federal Reserve Bank, and the remaining 4 members who are rotated among the other 11 Federal Reserve presidents for one-year terms.
The Federal Reserve's interest rate decisions are mostly passed unanimously, but sometimes there are one or two dissenting votes, which has happened in the three interest rate meetings since July this year.
Since the second half of this year, internal divisions within the Federal Reserve have widened significantly, with dissenting votes appearing in the policy statements of July, September, and October. Behind these disagreements lies the objective factor of signs of stagflation in the US economy: a weakening labor market coupled with persistently high inflation. The former demands rate cuts, while the latter advocate for rate hikes, making consensus difficult. Can Hassett, who has criticized Powell for not being aggressive enough in cutting rates, bridge these divisions?
Another factor contributing to the growing divisions within the Federal Reserve was Trump's nomination of Miguel Milan, chairman of the White House Council of Economic Advisers, to the Federal Reserve Board of Governors. Since taking office in September, Milan has voted against rate cuts at both the September and October policy meetings, arguing that rates should be cut by 50 basis points instead of 25 basis points.
However, at the October policy meeting, Kansas City Fed President Schmid cast a dissenting vote, favoring a pause in rate cuts.
Federal Reserve governors are nominated by the President of the United States. The current seven governors are: Chairman Jerome Powell, Vice Chairman Philip N. Jefferson, Vice Chairman for Supervision Michelle W. Bowman, and governors Michael S. Barr, Lisa D. Cook, Stephen I. Miran, and Christopher J. Waller. Jefferson, Barr, and Cook were nominated by Biden, while Bowman, Miran, and Waller were nominated by Trump. Although Powell's term as Federal Reserve Chairman expires in May 2026, his term as a governor will end in January 2028. While Federal Reserve chairs typically resign from their governorships after leaving office, Powell has not yet commented on this.
(Source: The Paper)
