Kevin Hassett Emerges as Top Contender for Federal Reserve Chair
Even with significant apprehensions from Wall Street and corporate leaders, Kevin Hassett is still prominently in the running to succeed Jerome Powell as Chair of the Federal Reserve.
“The decision is ultimately up to the president,” a source familiar with the nomination process noted.
This week, Trump initiated discussions with potential candidates about who could take over at the Fed. He recently connected with Kevin Warsh, a former Fed director and Stanford University scholar. Other candidates may also have upcoming meetings with the president.
Executives observing Trump’s choices are somewhat skeptical, interpreting these conversations as more of a performance than a genuine deliberation.
“Every executive I speak to believes Hassett is the frontrunner,” shared one CEO. “This is largely because Trump is very focused on lowering short-term interest rates. While Powell has made only slight reductions, Trump is eager for more aggressive cuts.” Hassett is perceived as willing to align very closely with Trump’s economic agenda.
“He endorses MAGA policies almost daily,” another CEO commented, referring to Hassett’s support as he vies for a role typically expected to be independent from political influence.
It’s essential to remember that the Federal Reserve was designed by Congress to have a degree of independence from the presidency. Although the president nominates the chair—who must be confirmed by the Senate—they can only be removed under specific circumstances like misconduct. Otherwise, Powell might have already been let go for resisting Trump’s calls for deeper interest rate cuts.
The Fed also operates under a “dual mission,” which involves managing monetary policy to achieve price stability while fostering job creation without triggering inflation. This balancing act is often challenging, leading to tensions between the Fed and the White House, as seen with Powell and Trump.
Trump likely wouldn’t face the same challenge with Hassett, who is currently heading the National Economic Council. Hassett has actively promoted policies like tariffs, which some argue have contributed to ongoing inflation challenges. In response, Trump has attempted to mitigate impacts by providing subsidies to affected farmers and bonuses to consumers.
This connection to MAGA policies raises concerns among CEOs and market analysts regarding Hassett’s potential influence as Fed chair. If he adopts an approach that favors printing more money and neglecting inflation, it might unsettle the bond market. This scenario could lead to investors demanding higher interest rates, ultimately increasing costs for financing budget deficits and impacting economic growth.
As previously highlighted, CEOs have cautioned the White House about the risks Hassett’s nomination could pose to the bond market, which might explain Trump’s recent meetings aimed at reassessing his choice for Powell’s successor.
Nevertheless, Trump seems inclined towards Hassett, appreciating his strong presence—particularly in media discussions about MAGA economics—and his solid credentials, including a PhD in economics from the University of Pennsylvania and experience at the Fed and various think tanks.
Yes, Hassett checks many crucial boxes, especially since he’s a known Trump supporter, which has propelled him to the forefront of the candidate pool. Will Trump surprise everyone? It’s possible. If he does, it may prompt a positive reaction from Wall Street.
