On December 12 local time, US President Trump said that former Federal Reserve Governor Kevin Warsh and White House National Economic Council Director Kevin Hassett are the leading candidates for the next Federal Reserve Chairman.
Trump also anticipates that the next Federal Reserve chairman will consult him on interest rate issues. Some foreign media outlets have pointed out that this would mean the Fed's long-standing tradition of independence would be overturned.
When asked about his desired interest rate level a year from now, Trump said on the 12th that it should be at 1% or lower. On Wednesday, the Federal Reserve announced a 25 basis point rate cut, lowering the target range for the federal funds rate to 3.5%–3.75%.
Leading candidates for Federal Reserve Chair: Warsh, Hassett
On December 12, local time, Trump said that Kevin Warsh and Kevin Hassett were the top candidates for the next Federal Reserve Chairman, and that he expected the next Fed Chairman to consult him on interest rate issues.
In an interview with the Wall Street Journal on Friday, Trump said that former Federal Reserve Governor Warsh has become one of the strongest contenders to challenge Hassett. Trump stated that Warsh is high on his shortlist. Trump added, "Warsh and Hassett are both good. Of course, there are several other excellent candidates as well."
In recent weeks, Trump has repeatedly hinted that he has chosen a candidate for Federal Reserve Chair, with Hassett increasingly seen as the frontrunner. However, Trump's latest statements indicate that Warsh remains firmly in the running.
Warsh is currently a visiting scholar at Stanford University and served as a Federal Reserve governor from 2006 to 2011. Trump interviewed Warsh for the position of Federal Reserve chairman in 2017 but ultimately chose then-Governor Jerome Powell. After being re-elected president in January of this year, Trump repeatedly criticized the Federal Reserve for being too slow in cutting interest rates and threatened to remove Powell from his post.
According to foreign media reports, sources revealed that Trump met with Warsh at the White House on Wednesday for 45 minutes, during which he pressured Warsh to guarantee his support for interest rate cuts if elected Federal Reserve Chairman. Trump confirmed this in an interview. "He thinks we have to cut rates," Trump said of Warsh. "Everyone I've talked to thinks so too."
Speaking in the Oval Office, Trump said the next Federal Reserve chair should consult with him on interest rates, a move that would overturn the Fed's tradition of independence. "I've been very successful, and I think my role should at least be to advise—they don't have to do what I say," Trump told reporters, adding that he expects to make a choice in the coming weeks. "I think my opinions should be heard, but I won't use them as the basis for decisions," Trump said.
Trump again urged a significant interest rate cut. When asked about his desired interest rate level a year from now, Trump said, "1%, maybe even lower." He stated that a rate cut would help the U.S. Treasury reduce the financing costs of its $30 trillion government debt. Trump said, "We should have the lowest interest rates in the world."
The Federal Reserve cut its benchmark interest rate to between 3.5% and 3.75% on Wednesday, marking the third consecutive rate cut at its meeting. Three Fed officials dissented from the decision, and the Federal Open Market Committee has not yet decided on further rate cuts.
JPMorgan Chase Dimon states: Supports Walsh
According to the Financial Times, JPMorgan Chase CEO Jamie Dimon recently stated at a private asset management CEO conference in New York that he supports Kevin Warsh as the next chairman of the Federal Reserve.
Dimon stated bluntly that Warsh would become a "great Fed chairman," and warned the Wall Street executives present that another leading candidate, Hassett, might be more compliant with the White House's desire to cut interest rates, but this could trigger a reverse game in the market, causing long-term borrowing costs to rise instead of fall, damaging the Fed's crucial independence.
Hassett served as an official in two Trump administrations, and as a Washington insider, his close relationship with Trump has hampered his candidacy.
The report states that Dimon, one of the most influential figures on Wall Street, indicated that if Hassett is elected, he is highly likely to quickly lower short-term interest rates to align with Trump's economic agenda. However, the Federal Reserve can only control short-term interest rates; long-term interest rates (such as the 10-year Treasury yield) are priced by the market.
Dimon warned that such aggressive rate cuts could ignite inflation expectations due to market concerns about Hassett's lack of independence and excessive dependence on the White House. At that point, market-priced long-term interest rates (such as the 10-year Treasury yield) would surge as investors sell bonds.
Dimon's remarks came after the Financial Times reported last week that Wall Street bond investors had expressed concerns about Hassett to U.S. Treasury officials, who had previously directly solicited opinions from market participants on the Federal Reserve chair nominee. Several participants in the $30 trillion U.S. Treasury market said they were worried that Hassett's stance aligned with Trump's.
It is worth noting that several Federal Reserve officials expressed conflicting views on interest rates this Friday, including two members who will have voting rights next year.
Cleveland Federal Reserve Bank Bank of England President Beth Hammack indicated she would prefer to maintain a slightly more restrictive interest rate stance to keep inflation at a level that remains too high. Inflationary pressures persist. Chicago Fed President Austan Goolsbee stated that he opposes the Fed's decision to cut interest rates this week because he wants to wait for more economic data to confirm that the impact of tariffs on inflation is temporary. Kansas City Fed President Jeff Schmid stated that he opposes the Fed's decision to cut interest rates this week because inflation remains too high and the economy still shows momentum.
Philadelphia Federal Reserve Bank President Anna Paulson said she expects inflation to cool next year, but also cautioned against the risk of further weakness in the labor market. Paulson stated, "Overall, I remain more concerned about a weak labor market than the upside risks to inflation. This is partly because I think there's a considerable chance that inflation will fall as we move into next year." She added that the impact of tariffs on commodity prices should gradually diminish by the middle of next year.
San Francisco Federal Reserve Bank President Mary Daly said the Fed's decision to cut interest rates this week was not easy, but she ultimately supported the move. She stated, "Real wage growth comes from a long period of steady economic expansion. And the current expansion is still in its relatively early stages."
(Source: Securities Times)
