“When the White House hesitates, Wall Street holds its breath.”
Investor concern continues to rise, with searches for the “next Fed Chair” increasing 95% and market fear indicators up 40% since Trump announced new interviews. Bond traders caution that if extreme rate cuts occur, the $30 trillion Treasury market may see significant volatility.
Four out of five dealers think the wrong choice might cause market turbulence in 2025.
The pressure surrounding the contest for one of the most influential economic positions in the world has never been higher, with only two weeks remaining before Trump selects Powell’s successor.
Kevin Hassett, the head of the National Economic Council, is still in the lead, according to senior insiders. Trump’s choice to resume interviews, however, indicates that he is not assured of the Fed head position.
This week, former Fed governor Kevin Warsh is set to meet with the president and Treasury Secretary Scott Bessent; additional interviews are planned before to the final announcement in early January.
Hassett, Warsh, BlackRock CEO Rick Rieder, and Fed governors Christopher Waller and Michelle Bowman are on the shortlist. Although Trump claimed to already have “a pretty good idea” of who he wants, markets are viewing the process as a high-stakes endeavour.
Hassett’s tight ties to the White House are causing concern for some bond investors. They worry that he would lower interest rates too soon, which might have an impact on the $30 trillion Treasury market and inflation.
In an attempt to allay those worries, Hassett recently declared that the Fed must maintain its independence and concentrate solely on economic data.
There could also be an unexpected turn of events. According to officials, Hassett might even serve a shorter term, allowing Bessent, Trump’s long-standing favourite to assume power later in the second term.
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