Kevin Hassett, the Director of the National Economic Council, and Kevin Warsh, a former Federal Reserve governor, are in fierce competition for the position of Federal Reserve Chair, while U.S. Treasury Secretary Mnuchin is rumored to be eyeing both the Treasury Secretary role and the Federal Reserve Chair position.

Written by: Li Xiaoyin

Source: Wall Street Journal

In Trump's high-profile selection process, the race for the next Federal Reserve Chair is becoming a dramatic power play.

According to media reports, Kevin Hassett, the Director of the National Economic Council, and Kevin Warsh, a former Federal Reserve governor—both "Kevins"—are in intense competition for this key position.

Sources cited by the media indicate that Hassett's momentum is rapidly rising, while Warsh, an early favorite, is beginning to face scrutiny.

Recent updates show that Hassett, as a core economic advisor to Trump, has met with the president at least twice in June to discuss the Federal Reserve Chair position; meanwhile, Warsh, despite being an early favorite, is facing doubts due to a lack of trust from Trump's inner circle and his "hawkish" background.

Nick Timiraos, a senior reporter known as the "New Federal Reserve Correspondent," also tweeted that Hassett is in fierce competition with Warsh for the position.

At the same time, U.S. Treasury Secretary Mnuchin is rumored to be interested in both the Treasury Secretary role and the Federal Reserve Chair position, with some reports suggesting that Trump has proposed allowing him to hold both positions.

Hassett: A Veteran in the Economic Circle, Appears to Shift Stance to Align with Trump

At 63, Hassett is an academic economist who worked at the Federal Reserve in the 1990s and has a strong theoretical background.

For the past eight years, he has been a core member of Trump's economic team, having served twice during Trump's first term and adaptively shifting his stance to align with Trump.

According to sources, Hassett has recently transitioned from being "disinterested" to clearly stating that he would accept the Chair position if nominated.

His public stance has also shown a significant shift. He previously claimed that his job was to "remind people to respect the independence of the Federal Reserve," but he has recently become one of Powell's most vocal critics, accusing the Federal Reserve of making decisions based on partisan positions rather than economic data.

In a television interview at the end of June, Hassett stated that Powell was "colluding with the Democrats" to help his electoral opponent:

"Powell cut rates on the eve of the election to help Harris."

Last fall, Hassett had given a favorable assessment of the Federal Reserve's rate cut in September, stating that policymakers should be rated based on the information available at the time of their decisions, calling the rate cut "very reasonable based on the data available at that time."

Warsh: Elite Background, Attempting to Reshape Hawkish Image

At 55, Warsh is a former Federal Reserve governor with a high-end financial background, married into the billionaire Ronald Lauder family, and closely associated with traditional Republicans like Paul Ryan.

As an advisor to former President Bush, Warsh has been a strong advocate for free trade over the past decade, which is both his strength and a barrier to Trump's trust in him.

In recent weeks, Warsh has attempted to repackage his long-standing support for inflation-targeting or "hawkish" monetary policy.

In multiple speeches and a Fox interview on Monday, Warsh suggested that if he collaborated with Mnuchin to reduce the approximately $6.2 trillion in Treasury bonds and mortgage-backed securities held, the Federal Reserve could cut rates more aggressively.

Reports indicate that he plans to travel to Washington this month to meet with Mnuchin to discuss the Chair position, and his long-standing connections with Trump and television persona may be advantageous.

Mnuchin: In a Delicate Position, Both Advisor and Candidate

Treasury Secretary Mnuchin plays a unique role in this race for the Chair position.

Sources indicate that Trump has expressed to Mnuchin his hope that he would become the next Federal Reserve Chair, even suggesting at one point that he could serve as both Treasury Secretary and Federal Reserve Chair, although it remains unclear whether the latter was a serious proposal.

Mnuchin himself has suggested that Trump consider current Federal Reserve governors Waller and Bowman as candidates for the Chair position, both of whom were appointed by Trump but are currently viewed as low-probability candidates.

Media analysis suggests that Mnuchin's statement could further exacerbate divisions within the Federal Reserve, especially considering that Waller and Bowman have recently indicated they might vote to support a rate cut at this month's meeting, contrary to Powell's position.

Mnuchin's attitude towards Powell is also quite dramatic.

In April, he referred to the independence of the Federal Reserve as a "jewel box that needs to be cherished," but by the end of June, he mocked Powell's cautious rate-cutting strategy, likening it to "an old man who always walks with his head down after falling."

Sources indicate that he is also concerned about whether Powell will continue to serve as a governor until January 2028 after his term as Chair ends, viewing this as Powell's last bargaining chip to maintain the Federal Reserve's independence.

Trump's Clear Expectations for the Chair Candidate: Prioritize Rate Cuts

The conflict between Trump and current Chair Powell is the catalyst for this competition.

He has previously expressed dissatisfaction multiple times, believing that the Federal Reserve has failed to effectively address the inflation risks that may arise from his tariff policies, while also blaming high-interest rate policies for hindering economic growth.

Trump has also explicitly stated that he expects the next Federal Reserve Chair to quickly initiate rate cuts, which is a clearer condition than during his first term.

Market analysts point out that this public confrontation could further undermine the independence of the Federal Reserve; if the new Chair is too accommodating to Trump's demand for rate cuts, it may raise market concerns about inflation expectations.

Powell's term as Federal Reserve Chair will end in May next year, while his term as a member of the Federal Reserve Board will continue until January 2028. Market speculation suggests that Trump may announce his successor before Powell steps down.

Media reports indicate that one possibility discussed by Trump's advisors is to arrange for Hassett to join the Federal Reserve Board through a vacant governor position in February next year, and then decide whether he or Waller will succeed Powell as Chair.

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