Ken Griffin, founder of hedge fund giant Citadel, has warned that the White House must maintain "distance" from the Federal Reserve, reflecting Wall Street's growing unease over President Trump potentially appointing a loyalist as Fed chair. His remarks underscore investor concerns about the central bank's independence.
Griffin stated during an event in Paris that "the most important step the president and the incoming Fed chair can take... is to create distance between the White House and the Federal Reserve." He made the comment when asked about the suitability of White House economic adviser Kevin Hassett for the Fed leadership role.
The competition for the next Fed chair has intensified as current Chair Jerome Powell's term expires in May next year. While Hassett was previously considered a frontrunner, his odds have recently declined amid concerns among Wall Street executives about his lack of independence from Trump.
Griffin's warning highlights deeper market anxieties about potential political interference in monetary policy, which could significantly impact the U.S. dollar, bond markets, and inflation expectations.
Wall Street leaders have collectively questioned Hassett's independence. Having served in both Trump administrations, Hassett has stated that the Fed should set interest rates free from political pressure. However, he told CNBC on Tuesday that if the president has good economic policy ideas, he would communicate them to the central bank's rate-setting committee. "The president is a seasoned observer of the economy," Hassett remarked.
JPMorgan Chase CEO Jamie Dimon recently suggested former Fed governor Kevin Warsh as a strong alternative candidate. Warsh played a key role as a liaison between the Fed and Wall Street during the 2008 financial crisis.
Bond investors have reportedly expressed concerns to the Treasury about Hassett's potential nomination. Betting markets have adjusted odds, showing Hassett now running neck-and-neck with Warsh.
Trump has pressured for rate cuts, insisting rates should fall to 1% despite inflation remaining above the Fed's 2% target. The Fed has cut rates three times this year, with last week's 25-basis-point reduction bringing the benchmark federal funds rate to a three-year low of 3.5%-3.75%.
Only one voting member of the Federal Open Market Committee—Fed governor and Trump ally Stephen Miran—supported a 50-basis-point cut.
Griffin, who attended an exclusive White House dinner with about a dozen Wall Street executives last month, noted Trump showed keen interest in business leaders' suggestions for addressing affordability issues frustrating American voters.
The hedge fund founder declined to endorse any specific candidate, stating it wouldn't "add anything to the current debate or decision." He emphasized the president should choose someone who can reassure global markets, U.S. investors, and consumers about inflation management.
While historically a major Republican donor, Griffin didn't explicitly support Trump in last year's election and has previously criticized the president's tariff policies.
Griffin observed an "ironic reversal" as polls show improved Democratic prospects for next year's midterms, with Republicans struggling with the inflationary consequences of many policies.
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