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In a surprise move that has reshuffled expectations for the next Federal Reserve chair, President Donald Trump indicated Friday he would prefer to keep Kevin Hassett in his current role as director of the National Economic Council rather than nominate him to lead the central bank.
“I actually want to keep you where you are, if you want to know the truth,” Trump said to Hassett during a White House event. “I just want to thank you, you were fantastic on television the other day.”
The remarks have upended what had been an extensive search process to find a replacement for current Fed Chair Jerome Powell, whose term expires on May 15. Hassett, who served in Trump’s first administration, had been widely considered the front-runner for the position, with Trump himself referring to Hassett as a “potential Fed chair” just last month.
Trump’s apparent change of heart has significantly boosted the prospects of Kevin Warsh, a former Fed governor who has emerged as another top contender for what is considered one of the most powerful financial positions globally. Warsh’s candidacy has gained additional momentum following recent tensions between the Trump administration and the Federal Reserve.
Those tensions escalated dramatically last week when the Justice Department issued subpoenas to the Federal Reserve, an unprecedented move against the central bank. Powell responded with an unusual video statement on Sunday, suggesting the subpoenas represented retaliation for the Fed’s reluctance to cut interest rates as aggressively as Trump desired.
The criminal investigation—the first ever targeting a sitting Fed chair—relates to testimony Powell gave before the Senate Banking Committee last June regarding a $2.5 billion building renovation project. The move sparked significant pushback on Capitol Hill, with numerous Republican senators dismissing the notion that Powell could have committed any crime.
Financial analysts suggest this controversy has complicated Hassett’s potential nomination. “The brouhaha over the subpoenas is making it harder to confirm Hassett, who is distinctively close to the president,” noted Krishna Guha, an analyst at investment bank Evercore ISI. “Warsh is trusted by Senate Republicans and would be much easier to confirm.”
The episode has intensified concerns in Washington that the Trump administration might be attempting to undermine the Federal Reserve’s traditional independence from political pressure. Central bank independence has long been considered essential for effective monetary policy and economic stability.
Trump’s complicated relationship with Powell dates back to 2018, when he appointed Powell to the chairmanship but soon expressed dissatisfaction when the Fed raised interest rates that year. Despite completing his term as chair, Powell could technically remain on the Fed’s Board of Governors afterward, though such a move would be unusual.
Warsh’s potential nomination carries significant implications for monetary policy. He is historically known as a “hawk”—someone who typically favors higher interest rates to combat inflation—as opposed to a “dove” who prioritizes lower borrowing costs to stimulate employment and economic growth.
Market participants appeared to react to the shifting nomination landscape on Friday. The yield on the 10-year Treasury note rose to just above 4.2% from approximately 4.17% the previous day, likely reflecting investors’ perception that Warsh’s improved chances could signal a more hawkish Fed policy trajectory than would be expected under Hassett’s leadership.
The selection of the next Fed chair comes at a crucial juncture for the U.S. economy, with inflation concerns, labor market dynamics, and global economic uncertainties creating a complex environment for monetary policy decisions in the coming years.
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9 Comments
The Fed chair selection is always an important decision, and Trump’s comments have certainly added some complexity to the process. It will be worth following how this plays out and what it might mean for the Fed’s future direction.
Trump’s apparent change of heart on Hassett’s candidacy for the Fed chair role has certainly thrown a curveball into the selection process. It will be worth watching how this plays out and what it might mean for the Fed’s future direction and relationship with the administration.
This is an interesting development in the search for the next Fed chair. Hassett’s experience and TV presence seem to have impressed Trump, but keeping him in the NEC could complicate the selection process. It will be worth watching how this plays out.
Trump’s preference for Hassett in his current role raises some questions about the Fed chair selection. Warsh’s prospects may have improved, but the administration’s relationship with the Fed will be key to monitor.
The Fed chair position is such a critical role, and Trump’s comments have certainly shaken up the expectations. I’m curious to see if this signals a shift in the administration’s priorities for the Fed’s leadership going forward.
It will be interesting to see how this impacts the Fed’s independence and its ability to navigate the economic challenges ahead. The selection process seems more uncertain now with Hassett potentially staying put.
This is a surprising twist in the Fed chair saga. Hassett had been seen as the frontrunner, but Trump’s preference to keep him in the NEC could open the door for other candidates like Warsh. The administration’s relationship with the Fed will be crucial.
This is an intriguing development in the search for the next Fed chair. Hassett’s experience and TV presence may have impressed Trump, but keeping him in the NEC could create challenges. I’m curious to see how the administration navigates this decision.
The Fed chair position is so critical, and Trump’s comments have certainly shaken up the expectations. It will be interesting to see if this signals a shift in the administration’s priorities for the Fed’s leadership.