U.S. President Donald Trump has indicated that he will judge the competence of the next Federal Reserve Chair based on whether they swiftly implement interest rate cuts. When asked if rapid rate reductions would serve as a "litmus test" for his preferred nominee, Trump responded unequivocally: "Yes." He also took aim at current Fed Chair Jerome Powell, stating, "I don’t think he’s very smart, nor does he like the Trump administration."
Trump’s remarks signal his expectations for the next Fed leader, who will helm the world’s most influential central bank. Kevin Hassett, Director of the White House National Economic Council and a frontrunner for the position, recently argued that economic data justifies immediate rate cuts. Markets are betting heavily on Hassett’s dovish stance, with prediction platforms like Kalshi, PredictIt, and Polymarket assigning him a 60%+ probability of securing the role.
Hassett, however, cautioned that pre-committing to a six-month rate path would be irresponsible, emphasizing data-dependent decision-making. Trump has repeatedly pushed for rates below 2%, while the current target range stands at 3.75%-4%. The Fed is widely expected to cut rates by 25 basis points in its upcoming policy decision.
Powell’s term as Chair ends in May 2026, though his Board tenure extends to 2028. Trump hinted he may announce his nominee early next year. Other finalists include Fed Governors Christopher Waller and Michelle Bowman, ex-Governor Kevin Warsh, and BlackRock executive Rick Rieder.
Analysts warn that a Hassett nomination could test the Fed’s independence, given his alignment with Trump’s agenda. Notably, long-term Treasury yields fell after reports surfaced about his candidacy—a trend Hassett cites as proof he can balance political demands with market credibility. However, Man Group strategist Kristina Hooper cautioned that perceived erosion of Fed independence might force quantitative easing to curb long-term rates.
The next Chair will inherit a deeply divided Fed, split between officials fearing labor market weakness and those prioritizing inflation risks. Markets currently price in an 88% chance of a December rate cut, though expectations have been volatile. By 2026, FOMC voting membership will tilt hawkish, complicating further easing.
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