U.S. Treasury Secretary Yellen: The nominee for Federal Reserve Chair may be announced before Christmas; the Fed should return to a behind-the-scenes role.

On November 25th, U.S. Treasury Secretary Bassent stated that President Trump may announce the new Federal Reserve Chair before Christmas, providing the market with a relatively clear policy timeline.

According to media reports on Tuesday local time, Bassent, who is in charge of finding Powell's successor, revealed in an interview on Tuesday that he still has one interview to complete and will not speculate on who will become the next Fed Chair at this time. Bassent stated:

"I think there’s a good chance the President will make an announcement before Christmas. But that’s totally up to his discretion, whether it’s before the Christmas holidays or after the New Year. But I think everything is going smoothly."

Bassent also proposed reforms to the Fed's functions, believing the central bank should 'return to the background' and simplify its complex policy toolbox. He specifically pointed out that the Fed’s ample reserves system has shown cracks; although policymakers have decided to halt quantitative tightening starting in December to maintain liquidity, the current system involves too many tools, including standing repo facilities, making it overly complicated. He said:

"I think we need to push for simplification. It’s time for the Fed to step into the background, as it did in the past, restore stability, and truly serve the American people."

The Treasury Secretary also questioned the Fed’s current communication mechanism, suggesting that central bank officials speak too frequently. He emphasized that there is a complex interrelationship between monetary policy, the balance sheet, and regulatory policy, which is a key aspect they are focusing on in the process of selecting the new Chair.

Previously, Trump has continually pressured the Fed to cut interest rates, even threatening dismissal, stating that he "would love" to fire Powell and encouraging Bassent to "work hard to influence" the Fed Chair to lower key rates. Trump even jokingly said to Bassent: “If you don’t solve the problem quickly, I’ll fire you.” In response, Bassent said:

"If you were in the room at the time, you’d know he was definitely joking. Monetary policy has become very complex now—it’s not just as simple as cutting rates."

Current Fed Chair Jerome Powell’s term will expire in May 2026. There are currently internal disagreements within the Fed about the necessity of further rate cuts, according to the latest statement from New York Fed President John Williams. The market widely expects the FOMC to approve a third consecutive rate cut at its December meeting.

Reportedly, the final list of candidates includes National Economic Council Director Kevin Hassett, former Governor Kevin Warsh, BlackRock executive Rick Rieder, and current Fed Governors Christopher Waller and Michelle Bowman.

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