Honestly, I think the end of QT combined with a potential new Fed Chair is a big wildcard for 2026. If Trump chooses someone more growth-focused or more aligned with his economic agenda, the path toward rate cuts in 2026 could open up faster than markets currently expect. But it really depends on whether the new Chair prioritizes inflation stability or political alignment.
Based on the current prediction odds, Hassett being the frontrunner at around 60%+ is interesting. His policy stance has historically leaned more toward pro-growth and lower rates, which could make him more receptive to cutting earlier if the economy slows. That said, markets sometimes overestimate how much influence a president actually has on the day-to-day decision-making at the Fed — credibility still matters.
For me personally, I'm neutral on who becomes Chair, but I do prefer someone who understands both market dynamics and the importance of Fed independence. Hassett seems more politically aligned, Waller is more of a traditional central banker, and Warsh has a hawkish track record. Each brings a different tone to the rate-cut debate. If I had to pick, I'd lean slightly toward someone like Waller, just for the steadiness and predictability.
As for whether the next Chair will behave like Powell — I think it's unlikely we'll see the same level of pushback against presidential pressure. Powell defended Fed independence pretty aggressively during the last administration. A Trump-appointed Chair this time might be more cooperative, at least in tone, even if they still need to maintain credibility with markets.
Overall, I do think a new Chair increases the chances of rate cuts in 2026, but only if inflation continues trending toward target. Politics may influence the direction, but macro data will ultimately determine how far and how fast the Fed can actually ease.
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