Trump Moves Closer to Naming Fed Chair Successor to Powell

• President Trump is actively considering a replacement for Federal Reserve Chair Jerome Powell, with a potential announcement as early as this summer or by September/October, aiming to undermine Powell’s authority before his term ends in May 2026.
• The shortlist of candidates includes Treasury Secretary Scott Bessent, National Economic Council director Kevin Hassett, former World Bank president David Malpass, former Fed governor Kevin Warsh, and Fed governor Christopher Waller, though Warsh and Waller face declining favor.
• Trump’s push for a new Fed chair, driven by his dissatisfaction with Powell’s monetary policy and calls for rate cuts, could introduce market uncertainty and challenge the Federal Reserve’s independence, impacting indices like the S&P 500 (SPX).

President Donald Trump’s ongoing friction with Federal Reserve Chair Jerome Powell has reached a critical juncture, with the administration intensifying efforts to identify a successor as Powell’s term nears its end in May 2026. Trump’s dissatisfaction with Powell’s cautious monetary policy, particularly his resistance to aggressive rate cuts, has fueled speculation about a potential early announcement of a replacement, a move that could undermine Powell’s authority during the remainder of his tenure. The president has signaled a narrowing field of candidates, with The WSJ indicating that a decision could come as early as this summer or by September or October, though no final timeline has been confirmed.

The list of potential successors includes Treasury Secretary Scott Bessent, National Economic Council director Kevin Hassett, former World Bank president David Malpass, former Fed governor Kevin Warsh, and current Fed governor Christopher Waller. However, conflicting reports suggest that Warsh’s prospects may be fading, while Waller’s recent vote to maintain current interest rates has reportedly diminished his standing with the administration. Bessent, who has expressed contentment with his current role through 2029, has not ruled out accepting the Fed chair position if selected, emphasizing his willingness to align with Trump’s agenda. Hassett and Malpass, both aligned with the administration’s economic priorities, remain strong contenders, with their policy views favoring deregulation and fiscal expansion.

Trump’s public criticism of Powell, including personal attacks labeling him a “loser” and “fool,” reflects broader tensions over monetary policy direction. The president has repeatedly pushed for lower interest rates to stimulate economic growth, a stance at odds with Powell’s data-driven approach, which prioritizes inflation control and economic stability. This discord has led to discussions of a “shadow chair” strategy, first proposed by Bessent in 2024, aimed at signaling a shift in leadership and diminishing Powell’s influence well before his term concludes. Such a move would be unprecedented and could introduce significant uncertainty into financial markets, given the Federal Reserve’s critical role in global economic stability.

Powell, for his part, has maintained that he intends to serve out his term and that legal protections prevent his removal before May 2026. This assertion has not deterred the administration from exploring options, with reports indicating that Trump views an early announcement as a deliberate signal to the central bank. The Federal Reserve’s independence, a cornerstone of its ability to implement monetary policy without political interference, is under scrutiny as these developments unfold. Historical precedent suggests that presidents rarely attempt to directly influence Fed leadership transitions in this manner, making Trump’s approach a notable departure from tradition.

The potential candidates bring diverse perspectives to the table. Bessent, with his background in finance and close alignment with Trump’s economic vision, is seen as a frontrunner by some insiders. Hassett’s experience in economic policy and Malpass’s global financial expertise position them as viable options, though their ability to navigate the Fed’s complex mandate remains untested. Waller, as a current Fed governor, offers continuity but faces skepticism due to his recent policy stance. The selection process, as described by a White House official to YF, remains fluid, with Trump retaining flexibility to adjust his choice based on evolving priorities.

Financial markets are closely monitoring these developments, as the Federal Reserve chair wields significant influence over interest rates, inflation expectations, and economic growth. An early announcement could roil markets, particularly if it signals a shift toward a more politically driven monetary policy. Investors and policymakers alike are bracing for potential volatility, with the S&P 500 (SPX) and other major indices likely to react to any perceived instability in Fed leadership. The administration’s push to replace Powell underscores a broader debate about the balance between central bank independence and executive influence, a tension that will shape the economic landscape in the years ahead.

WallStreetPit does not provide investment advice. All rights reserved.

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