President Donald Trump’s leading candidate to succeed Federal Reserve Chair Jerome Powell, White House economic adviser Kevin Hassett, is facing mounting resistance from top advisers, lawmakers, and markets just weeks before Trump is expected to announce his choice for the central bank’s next leader.
According to a report, individuals close to Trump have privately expressed concerns about Hassett’s candidacy, arguing his deep alignment with the president could undermine perceptions of the Fed’s independence and unsettle financial markets. . Some advisers reportedly fear that nominating a loyalist could further politicize the central bank. Surprisingly, this connection had earlier made Hassett a top candidate to assume Jerome Powell’s current position.
Meanwhile, after this news leaked, reports mentioned that this opposition may clarify why interviews with candidates in early December were called off and later rescheduled for Kevin Warsh last week.
Uncertainties surrounding the fate of the next Fed chair spark concerns
Trump declared that he has already settled on who to serve as the chair of the Federal Reserve. This statement caught many by surprise after the president publicly claimed that Kevin Warsh, the former Fed Governor who is currently serving as the acting economic advisor to the Congressional Budget Office (CBO) and a member of the board of directors at UPS, rose as the leading contender alongside Hassett.
Trump’s remarks significantly affected Hassett’s odds, causing them to drastically drop on Kalshi prediction markets. Seeing how things turned out, the president argued, “I think the two Kevins are great.”
Nonetheless, Monday reports noted that Hassett is still in the lead on Kalshi, with his odds showing a 51% chance. However, this percentage illustrates a decrease from more than 80% odds raised earlier this month. Warsh, on the other hand, experienced a substantial increase in odds, rising to a 44% chance from around 11% at the beginning of December.
Analysts researched the situation and discovered that the current opposition appeared to be concentrated more on backing Warsh instead of criticizing Hassett. It also seems that apart from Trump, Jamie Dimon, the Chairman and CEO of JPMorgan Chase, preferred the former Fed governor. However, he positively talked about both Hassett and Warsh.
In the meantime, a reliable source highlighted that Hassett outperformed his competitors in the race by taking Powell’s position at the end of November. Notably, Powell’s term is scheduled to conclude in May next year.
Still, several sources emphasized that Hassett encountered some opposition as December progressed. Following this assertion, individuals raised concerns that the bond market might respond negatively if it perceived him as being too closely connected to the US president.
This perception could produce a contrary result from what Trump expects, potentially leading to a surge in long-term yields due to escalating fears that Hassett will not adopt strong measures to address inflation in the event of its increase.
Hassett embraced a stronger stance despite facing criticism
Responding to this criticism, Hassett embraced a stronger stance on the issue of Federal Reserve independence. He made this move during an interview held this past weekend.
In an appearance on “Face the Nation,” Hassett shared a transcript stating that, ‘Trump has strong and well-reasoned ideas about what we should do. However, the Federal Reserve’s role is to remain independent and collaborate with the Board of Governors and the FOMC to reach a consensus on interest rates.”
This statement drew the attention of several reports, prompting them to reach out to Hassett for comment on the topic of discussion. When asked whether Trump’s opinion held the same essence as that of a central bank member voting, Hassett stated that it did not. He further explained that the president had no influence and his opinion only counted if it was rooted in solid data.
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