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President Donald Trump faces an important decision in the coming months when he picks the next chairman of the Federal Reserve.
Trump has loudly regretted his previous pick, Jerome Powell, who was renominated as board chairman by President Joe Biden, and whose term as chairman ends May 15.
It is a Federal Reserve committee that votes to raise or lower key interest rates, which influences lending for every person and business in the country.
The Fed, as it’s known, is supposed to be an independent agency; governors are nominated by president and confirmed by the Senate, but they serve long 14-year terms in order to inoculate them from politics. The term for chairman is four years.
In an interview with the Wall Street Journal this week, Trump said he’s leaning toward nominating either former Fed Governor Kevin Warsh or National Economic Council Director Kevin Hassett. “The two Kevins,” he called them. He also reiterated his belief that the Fed chair should consult the president about interest rate decisions.
Trump has tested the independence of the Fed, and it is one area where the Supreme Court has warned he cannot fire anyone he wants.
I talked to CNN’s Matt Egan, a senior reporter covering business and the economy, about who Trump might pick and how Wall Street might react.
Our conversation, conducted by email, is below:
WOLF: Trump doesn’t talk about Powell that much these days, either because the Fed has been lowering rates or because the end of Powell’s term is in sight. What do we know about when Trump will name a replacement?
EGAN: President Trump has repeatedly shifted the timeline on naming a replacement for Powell, whose term as chair isn’t up until May. Earlier this year, Trump floated attempting to fire Powell, before backing down. Perhaps Trump realized this would be crossing a red line with investors. And then Trump suggested he could name a replacement this past summer. More recently, Trump has said he will name a replacement early in 2026, though given the aforementioned shifts it’s possible this timing slips again.
One major question that remains is whether Powell decides to stay on the Fed’s powerful Board of Governors beyond when his term as chair expires. The outgoing Fed chair usually — but not always — leaves altogether when their time at the helm is over. But there is speculation that Powell could remain on as a governor (his term as governor doesn’t expire until January 2028) in an effort to preserve Fed independence. Curiously, Powell hasn’t answered directly when questioned about his plans. “I haven’t got anything new on that to tell you,” Powell said on Wednesday when I asked at the press conference.
WOLF: What are the top names being considered? Is the thinking that he will want a MAGA follower or someone with a more mainstream banking and academic background?
EGAN: The thinking is Trump wants to name someone who shares his preference for cheap money. Over the years, Trump has not been shy about advocating for rock-bottom interest rates — even when stubborn inflation calls for higher rates. Asked by Politico if an immediate rate cut is a “litmus test” for who he will pick, Trump said “yes.” Regardless of whether Trump would like a MAGA Fed chair, he’s got to nominate someone who has the qualifications to get confirmed by the US Senate. So that limits his options considerably.
The odds-on favorite to be Trump’s Fed pick is Kevin Hassett, the conservative economist who chaired the White House Council of Economic Advisers during Trump 1.0 and currently serves as director of the National Economic Council. Hassett has advocated for lower rates — even calling for a half-point cut this week — and the prediction market Kalshi gives him a 70% chance to be the pick. However, other names also in the mix have already shown they can be Senate confirmed including former Fed Governor Kevin Warsh, whose father-in-law is major GOP donor Ronald Lauder. Another contender, current Fed Governor Christopher Waller, would likely be well received by Wall Street and corporate America.
WOLF: Trump wants more power over the Fed, but the chairman only gets one vote when it comes to raising or lowering rates. Ultimately, how much power does the chairman hold?
EGAN: The Fed chair has enormous power. It’s arguably one of the most powerful positions on the planet. Their words alone can move trillions of dollars in financial markets and when there’s an economic emergency, the world turns to the Fed chair for help.
And yet the Fed chair’s power is somewhat limited by the fact that the US central bank is a famously consensus-driven institution. Even the Fed chair only gets one vote on the 12-member rate-setting committee that decides whether to raise or lower rates. Whoever replaces Powell can’t act unilaterally to slash rates at Trump’s behest. He or she will need credibility inside the Fed to build support for future moves.
WOLF: Trump has said he expects the next Fed chair will oversee multiple rate cuts next year, but the Fed has only penciled in one rate cut so far. Can we expect fireworks no matter who is nominated?
EGAN: Yes. The Fed is increasingly divided. And that makes sense: It’s fighting a two-front war, without the tools required for that. Problem A: Inflation is stubbornly high, a problem that normally calls for stable or higher rates. Problem B: Unemployment is rising and hiring is weak, something that calls for lower rates.
For now, Powell & Co. have decided unemployment is the bigger threat. That’s why the Fed lowered rates this week for the third meeting in a row. However, this was an unusually close call. Three Fed officials dissented from Powell’s push to cut rates this week, the highest number of dissents since 2019.
WOLF: We know what Trump wants from the Fed. What do Wall Street investors want?
EGAN: It matters who you ask. The stock market is famously fickle. Short-term oriented traders love rate cuts because they make stocks more attractive and boost confidence. So in some ways, they might love a very dovish pick who favors ultra-low rates.
But in the medium to long-run, Wall Street investors want stability and credibility at the helm of the Fed. They want someone running the Fed who can put out the next fire, preventing a financial scare from turning into a full-blown meltdown. The real risk is that Trump picks someone who the bond market doesn’t trust to fight inflation, driving up the long-term interest rates that set the cost of mortgages and many other loans.
That would be a problem for the White House, Wall Street and Main Street.
WOLF: With the notable exception of Janet Yellen who was nominated by Obama and then worked in Biden’s administration, every recent Fed Chairman going back to Paul Volcker in 1979 has been nominated by a president from one party and renominated by a president from the other party. That includes Powell, who was first nominated by Trump in his first term. How important is that cross partisanship to the role?
EGAN: It’s helpful because it underpins the sense that the Fed isn’t in the bag for one party or another. And that can help the public, investors and CEOs trust that the Fed is doing what’s right for the economy, not basing decisions on the political calendar. Some in 2017-2018 even argued that Trump should have kept Yellen, who shared his preference for low rates.
