President Donald Trump's hunt for the next chair of the U.S. Federal Reserve is set to stretch into the new year, with a final decision now unlikely before January. The prolonged selection process is giving global investors, including those in India, an unprecedented early glimpse into the White House's priorities and the specific questions the president is posing to potential candidates.
The Front-Runners and the Question of Proximity
Treasury Secretary Scott Bessent confirmed the timeline on Tuesday, stating that while interviews are ongoing, the president is taking a deliberate approach and may conduct more discussions in the coming weeks. Trump himself has indicated a preference for two key figures: Kevin Hassett, the current Director of the National Economic Council, and Kevin Warsh, a former Federal Reserve governor. Both men are noted for their close personal relationships with the president.
This very closeness, however, has sparked debate about their independence. Hassett directly addressed these concerns during a press interaction on Tuesday, arguing that effective service to the president should not be a disqualifier. "I think that the idea that being close to the president and serving the president well disqualifies someone for any job just doesn't make any sense," he stated. He emphasised that the Fed chair's role must remain nonpartisan and focused on core monetary policy, echoing Trump's criticism that the Fed under Jerome Powell has strayed into areas outside its mandate.
Policy Priorities and Market Concerns
At the heart of Trump's search is a clear desire for significantly lower interest rates. The president has repeatedly blamed outgoing Chair Jerome Powell for maintaining rates that are too high. Last week, Trump told The Wall Street Journal he wants interest rates closer to 1%, a sharp drop from the current 3.50%-3.75% range, and has said the next chair should consult with him on rate policy.
This stance aligns with one of the other candidates reportedly being interviewed, Fed Governor Christopher Waller. Appointed by Trump, Waller has been a strong internal advocate for rate cuts this year, even dissenting in July to favour a reduction. Meanwhile, JPMorgan Chase CEO Jamie Dimon offered a private assessment at a recent conference, suggesting Hassett would likely cut short-term rates quickly but warning that his perceived closeness to Trump might prevent a similar fall in long-term bond yields, which are set by the market.
Rebuilding Trust and a Forward-Looking Fed
According to Treasury Secretary Bessent, Trump's interview questions extend beyond immediate rate policy. The president is pressing candidates on forward-looking issues like productivity and artificial intelligence, questioning if the Fed relies too much on historical data. Bessent also stressed the urgent need for the central bank to rebuild public trust, which he argued was damaged during the post-pandemic inflation surge.
Defending the leading candidates' credentials, Bessent highlighted Hassett's PhD in economics and compared his White House role to previous Fed chairs who also served in the executive branch. He described Warsh as equally qualified, with valuable experience from his time as a Fed governor and in financial markets. The message is clear: the Trump administration is seeking a Fed chair who aligns with its economic vision while navigating complex expectations of independence, a decision with profound implications for global markets.
