Trump Eyes Early Fed Pick to Influence Economic Policy

Former President Donald Trump is reportedly considering announcing his Federal Reserve chair nominee far in advance of the current chair’s term ending. This strategic move could significantly shape the trajectory of interest rates and financial markets.

Potential Nominees Emerge

According to recent reports, Trump is contemplating several individuals to replace current Fed Chair Jerome Powell. Potential candidates include former Fed director Kevin Warsh, ex-National Economic Council director Kevin Hassett, and current Treasury Secretary Scott Bessent. David Malpass, former World Bank president, and Christopher Waller, a current Fed Council member, are also under consideration.

The former president has expressed his strong dissatisfaction with Powell, recently labeling him “dumb and stubborn.” He has also renewed his calls for interest rate cuts.

Impact on Markets and Policy

Anticipating the early appointment, which is unusual given the timeline, could have a substantial impact on the markets, influencing expectations about interest rate movements even before any immediate decisions are made. Warsh mentioned at a private event that he would not be surprised if the nomination happened sooner than typically expected.

“He leaves soon, fortunately, because I think he’s terrible,”

—Donald Trump

During the NATO summit, Trump indicated that he has three or four potential names in mind for the succession. The White House emphasized the necessity of a pro-growth monetary policy in line with the president’s economic vision.

The task ahead involves finding a candidate who can successfully blend political loyalty with the ability to collaborate with other members of the Fed Committee. While the president can appoint board members, the interest rate policy is determined by a committee of twelve members, including representatives from regional banks.

Challenges and Risks

Hassett has reportedly indicated he has no interest in the position. Furthermore, Waller has gained attention by being the first Fed leader to hint at interest rate cuts in the upcoming July meeting. A survey showed that 63% of economists anticipate the Fed will cut rates by September (Reuters).

The anticipation of this appointment carries potential risks. Early nominations could face market pressure and public scrutiny, which may harm the nominee’s effectiveness before they even assume their role. Also, Powell could remain a council member until 2028, even after his term as chair ends, thereby maintaining influence within the committee.

Powell assured Congress that his focus remains on economic stability.

The reaction in New York futures markets was immediate following the report.