Powell's term will end in 2026, and there are currently differences within the Federal Reserve regarding interest rate cuts, while the December meeting is still expected to achieve the third rate cut.

Written by: Li Jia

Source: Wall Street Journal

U.S. Treasury Secretary Mnuchin stated on November 25 that President Trump may announce a new Federal Reserve chair nominee before Christmas, providing the market with a relatively clear policy timeline.

On Tuesday local time, according to media reports, Mnuchin, who is responsible for finding Powell's successor, revealed in an interview that he still has one interview to complete and will not speculate on who will take over as Federal Reserve chair. Mnuchin said:

"I think the president is likely to announce something before Christmas. But it completely depends on his timing, whether before the Christmas holiday or after the New Year. But I think everything is progressing smoothly."

Mnuchin also proposed reforms to the Federal Reserve's functions, believing that the central bank should "return to the background" and simplify its complex policy toolbox. He specifically pointed out that the ample reserves system established by the Federal Reserve has shown cracks, and although decision-makers have decided to stop balance sheet reduction starting in December to maintain liquidity, the current variety of tools, including the standing repo facility, makes the system overly complex. He stated:

"I think we need to push for simplification. It's time for the Federal Reserve to step back, as it did in the past, to restore stability and truly serve the American people."

The Treasury Secretary also questioned the current communication mechanism of the Federal Reserve, suggesting that central bank officials speak too frequently. He emphasized that there is a complex interrelationship between monetary policy, the balance sheet, and regulatory policy, which is a key dimension they are focusing on in the selection of the new chair.

Previously, Trump had continuously pressured the Federal Reserve to cut interest rates, even threatening to fire Powell, stating that he "really wanted" to fire Powell and encouraged Mnuchin to "work to influence" the Federal Reserve chair to lower the key interest rate. Trump even jokingly told Mnuchin, "If you don't solve the problem quickly, I'll fire you." In response, Mnuchin said:

"If you were in the room at the time, you would know he was definitely joking. Monetary policy has become very complex now; it's not just as simple as cutting rates."

Current Federal Reserve Chair Powell's term will expire in May 2026. There are currently differences within the Federal Reserve regarding the necessity of further interest rate cuts. According to recent statements from New York Fed President John Williams, the market generally expects the FOMC to approve a third consecutive rate cut at the December meeting.

It is understood that the final candidate list includes National Economic Council Director Kevin Hassett, former Governor Kevin Warsh, BlackRock executive Rick Rieder, and current Federal Reserve Governors Christopher Waller and Michelle Bowman.

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