[Global Focus] Race for the Next US 'Economic President' to Align on Rate Cuts

Trump’s Longtime Economic Advisor
Youngest-Ever Fed Governor from Wall Street
Waller, the Fed’s Leading Dove

A three-way race is expected for the position of the next Chair of the US Federal Reserve (Fed), as Jerome Powell’s term ends in May next year. With President Donald Trump, who has persistently advocated for interest rate cuts, encouraging a “loyalty contest” among the candidates, it is anticipated that he will select someone aligned with his preferences. The leading contender is Kevin Hassett, Chairman of the White House National Economic Council (NEC), closely followed by former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller.

Kevin vs. Kevin: A Two-Top Race, with Waller Emerging as a Dark Horse

According to foreign media and online betting sites, Kevin Hassett is expected to be nominated as the next Fed Chair among the four main candidates. As of 4 p.m. on December 19, online betting site Kalshi showed Hassett with a 52% probability of being nominated, followed by former Governor Warsh at 27% and Governor Waller at 15%. Rick Rieder, Chief Investment Officer (CIO) of BlackRock Global Fixed Income, was also included in the final pool, but his presence is minimal compared to the other three.

Chairman Hassett is one of President Trump’s closest aides and a long-standing economic advisor. He served as Chairman of the White House Council of Economic Advisers (CEA) during Trump’s first term and made a high-profile return in the second term. He has supported Trump’s positions on Fed policy, criticizing the Fed for “undermining its own independence and credibility.” Although he has advocated for free trade as an economist from the American Enterprise Institute (AEI), a Republican think tank, he has sometimes drawn criticism for taking the opposite stance during the Trump administration. Previously, he served as an economic advisor to former President George W. Bush, as well as to the John McCain and Mitt Romney campaigns.

One reason the market sees Hassett’s chances as high is his background. In an analysis on December 15, Bloomberg Economics economist Anna Wong noted, “Three out of the last four Fed Chairs previously served as CEA Chair, which means Hassett’s background fits the typical career path of Fed Chairs.” She also pointed out that three of the four had Republican political leanings, highlighting another commonality.

Another candidate, former Governor Warsh, has a unique background as the youngest-ever Fed Governor from Wall Street. He recently received official support from Jamie Dimon, Chairman of JPMorgan Chase, known as the “Emperor of Wall Street.” In Korea, he is well known as an outside director of Coupang. During former President Bush’s administration, he was appointed as the youngest Fed Governor at age 35 and played a key role in shaping monetary policy during the financial crisis. He has served on Trump’s economic advisory team and competed with Chairman Powell for the Fed Chair position in 2017. Notably, Warsh’s wife, Jane Lauder, is the granddaughter of the founder of Est?e Lauder, a global cosmetics company, which could be a significant advantage given President Trump’s personal preference for strong networks.

There is also a third variable: Governor Waller, who was appointed as a Fed Governor during Trump’s first term. Having served as a professor for over 20 years, he is known as a representative “dove” who favors accommodative monetary policy. At the Federal Open Market Committee (FOMC) meeting in July, where rates were held steady, he was reportedly among the minority advocating for a rate cut. In a Wall Street Journal (WSJ) survey conducted in October, he was chosen by economists as the most preferred candidate. On Wall Street, he is regarded as the person best able to logically explain rate cuts and coordinate internal Fed disagreements.

Powell Refusing to Follow Trump’s Lead... Next Chair Must Demonstrate Loyalty

President Trump has made “loyalty” to himself the core criterion for selecting the next Fed Chair. He has repeatedly criticized Chairman Powell and indicated that he could name his successor before the end of the year. Trump has targeted Powell, saying, “Right now, we have someone who is not smart at all,” and “He should have proposed much faster and much lower rates.” Trump has consistently argued that the Fed’s response to rates was too slow and is expected to maintain this stance next year as well.

President Trump’s history of harsh criticism toward Chairman Powell is extensive. Appointed during Trump’s first term, Powell has been at odds with the President since the beginning. In August, Trump posted on his social network, Truth Social, “Stubborn idiot, ‘too slow’ Powell must immediately slash rates,” threatening to demand his removal from the Fed Board if he refused. According to the WSJ, it was Treasury Secretary Scott Bessent who intervened to stop Trump’s rampage, but Trump dismissed this, saying, “That’s a typical lie. No one needs to explain anything to me.”

Given Trump’s tendencies, the market is concerned about the potential erosion of the Fed’s political independence. Ironically, it is Hassett’s loyalty that has become a stumbling block for him, as Trump has openly identified him as a “leading” candidate. In early December, more than 80% of observers predicted Hassett’s nomination. In response to market concerns, Hassett explained, “The President will reject the notion that being friends with him disqualifies me from being Chair.” Similarly, Governor Waller said, “I will absolutely defend the Fed’s independence” when asked a similar question.

Regardless of who becomes the next Chair, it is expected that the FOMC will remain divided between “hawks” (favoring monetary tightening) and “doves” (favoring monetary easing). For example, at the December FOMC, the vote was nine in favor of a rate cut and three against. It was the first time since September 2019 that three committee members voted against the majority. Given the Fed’s usual preference for unanimous decisions, this was considered “unusual.”

The appointment process for the next Chair is expected to conclude soon. Hassett and Warsh have already completed interviews with the Trump administration, and Waller finished his interview last weekend. With reports that Waller’s interview was “successful,” his chances as a dark horse have increased. According to US business media CNBC, CIO Rieder is scheduled to be interviewed at Trump’s Mar-a-Lago residence in Florida during the last week of this month. Michelle Bowman, a Fed Governor who was initially considered a candidate, has reportedly been excluded from the final pool.

The WSJ analyzed, “The next Fed Chair to be nominated by President Trump is likely to fill the seat of Fed Governor Stephen Miran, whose term expires on January 31 next year.” This means that Trump could have the new Chair participate in the key rate-setting meetings in March and April, ahead of the official term that begins in mid-May. There are three remaining FOMC meetings before Powell’s term ends in May next year, scheduled for January, March, and April. However, even after his term as Chair ends, Powell will remain a Fed Governor until January 2028.