Quick Takeaways
- Kevin Hassett’s Fed chair candidacy faces resistance from Trump-aligned insiders.
- Critics fear markets may question Fed independence under a Hassett appointment.
- Kevin Warsh gains momentum as an alternative favored by Wall Street CEOs.
Kevin Hassett’s route to securing the position of Federal Reserve chair has become uncertain. According to sources, the nomination is encountering opposition from key individuals near President Donald Trump.
Hassett, the current director of the National Economic Council, was once viewed as the frontrunner. Markets largely assumed he would replace Jerome Powell when Powell’s term ends in May.
However, recent developments suggest the decision is still open. Behind-the-scenes resistance has begun reshaping the race.
Concerns Over Fed Independence Emerge
The resistance does not center on Hassett’s credentials. Instead, it focuses on his proximity to President Trump.
Sources say senior advisers worry markets could view Hassett as too closely aligned with the White House. That perception could raise doubts about the Federal Reserve’s independence.
Bond investors remain sensitive to political pressure on monetary policy. Any sign of influence could spark volatility in long-term yields.
Critics fear that if inflation returns, markets may doubt Hassett’s willingness to act aggressively. Rising yields would undermine Trump’s economic goals.
Kevin Warsh Gains Momentum as an Alternative
Rather than openly criticizing Hassett, insiders have begun promoting Kevin Warsh. The former Fed governor has quietly gained support.
Trump surprised markets last week by naming Warsh alongside Hassett as a leading candidate. The comments shifted expectations immediately.
Prediction markets reacted fast. Hassett’s odds on Kalshi dropped from above 80% earlier this month to about 51%. Warsh’s chances surged to roughly 44%, up from nearly 11% at the start of December.
“I think the two Kevins are great,” Trump said in an interview. The remark signaled an unresolved decision.
Wall Street Watches Closely
The fresh focus on Washington has captured the interest of Wall Street executives. During a JPMorgan gathering, CEO Jamie Dimon commended both contenders.
Nonetheless, Dimon’s statements implied trust in Warsh. Those present perceived his words as a show of support.
Bloomberg previously reported that Hassett emerged as the frontrunner in late November. Since then, the momentum has clearly shifted.
Several sources said candidate interviews were abruptly canceled in early December. Warsh later resumed talks, fueling speculation.
Markets now see the race as a true contest rather than a formality.
Hassett Pushes Back on Independence Criticism
Hassett appears aware of the concerns. Over the weekend, he addressed Fed independence directly in a televised interview.
Speaking on CBS’s “Face the Nation,” Hassett emphasized the central bank’s autonomy. He said the Fed must operate independently of political influence.
“The job of the Fed is to be independent,” Hassett said. “It works through consensus at the FOMC.” When asked whether Trump’s views would carry weight, Hassett was firm. “No,” he said. “The president would have no vote.”
Hassett added that policy decisions must rest on data, not politics.
Why the Decision Matters for Markets
The designation of the Fed chair holds consequences for the market. Investors are paying attention since inflation concerns are still unsettled.
A perceived reduction in autonomy might drive bond yields upward. This would restrict conditions and decelerate growth.
Warsh’s supporters argue his prior Fed experience reassures markets. He served during the financial crisis and is familiar with institutional norms.
Hassett, while respected, lacks direct Fed governance experience. That difference matters to investors focused on stability.
For Trump, the choice reflects a balancing act. He wants loyalty, but markets demand credibility.
What Comes Next
Trump has said he already knows his pick. Yet his recent comments suggest deliberations continue. Sources say informal consultations are ongoing. Both candidates remain under active consideration.
With Powell’s term ending in May, the decision timeline is tightening. Markets expect clarity in the coming months. Until then, speculation will persist. Bond yields, equities, and prediction markets will react to every signal.
One thing is clear. The next Fed chair choice will shape U.S. monetary policy for years.