Trump says "has decided on the new Fed chair," Hassett: "The market's reaction to the news of the new chair is very, very positive."
On Sunday, US President Trump stated that he had decided on the next Federal Reserve Chair candidate. Previously, he had repeatedly expressed hope that the new Chair would push for rate cuts. This comment sparked a positive market reaction, with the 10-year US Treasury yield briefly falling below 4%.
White House National Economic Council Director Kevin Hassett emphasized in a media interview on Sunday that the market’s response to Trump's imminent announcement of the new Chair candidate was "very, very positive." As Trump’s chief economic advisor, Hassett is seen as a strong contender to replace Powell and currently leads in Polymarket forecasts with a 66% probability.
Hassett said:
After the news broke, US Treasury auction performance was strong and interest rates fell, indicating that "the American people can look forward to Trump selecting someone who will help them get cheaper car loans and lower-rate mortgages."
US Treasury Secretary Bessent stated last week that Trump may announce his nominee before the Christmas holiday on December 25. The current Chair, Powell, will see his term end in May next year.
Trump Confirms Decision Made
Trump told reporters on Air Force One while returning to Washington on Sunday: "I know who I’m going to pick, yes. We’re going to announce." However, he did not reveal the name of the candidate.
Trump has frequently criticized current Fed Chair Powell for not cutting rates quickly, and has repeatedly signaled his hope for a new Chair to take a more aggressive approach to rate cuts. According to sources, Hassett is viewed as a possible successor.
Though Trump is known for making last-minute changes, rumors of Hassett’s possible nomination have already pushed the 10-year US Treasury yield briefly below 4%.
Hassett Emphasizes Market’s Positive Reaction
Appearing on CBS, Hassett refused to directly address whether he is the frontrunner to replace Powell, calling such reports "rumors." However, he emphasized the market’s positive response to the news of Trump’s imminent pick—the reaction is, in fact, a reply to investor concerns about his close relationship with the President.
Hassett said:
This week, when the news leaked, what struck me the most was—I think the message the market received is that President Trump is about to announce a new candidate to replace Powell. If you look at the market’s reaction, it’s very, very positive.
He added, “That’s what we’ve seen in the market’s reaction to rumors about me.” Analysts warn that Hassett may struggle to unify the Fed’s rate-setting committee and may be more susceptible to Trump’s pressure. But his emphasis on the market’s reaction essentially counters these concerns.
Nomination Procedure and Other Candidates
Sources indicate that Trump trusts Hassett and believes his willingness to support more aggressive rate cuts aligns with Trump’s own. Hassett has said he would accept the position if offered.
Treasury Secretary Bessent, who is overseeing the selection process, stated last week that Trump could announce the nominee before the Christmas holiday. Other finalists include Federal Reserve governors Christopher Waller and Michelle Bowman, former Fed governor Kevin Warsh, and BlackRock’s Rick Rieder. Trump also frequently expresses a wish for Bessent to serve as Chair, but Bessent has repeatedly declined.
Regardless of Trump’s choice, the nominee must be confirmed by the Senate for the Chair position. If the nominee is from outside the Fed, they may also need confirmation for a 14-year term as a Fed governor starting February next year. Powell’s term as Chair ends in May.
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