In the next six months, Powell may face the shadow of a "shadow chairman," whose policy statements may weaken market influence, while the policy tendencies of the new chairman candidates have begun to stir market nerves. The new chairman will not only face internal divisions but also widespread calls for the positioning and institutional reform of the Federal Reserve.

Source: Jinshi Data

U.S. President Trump has already chosen the next Federal Reserve chairman in his mind, but it has not yet been announced. The prediction market seems to have reached a consensus, but the frontrunners are also tight-lipped about it.

Although the suspense surrounding the candidates is expected to be revealed in the coming weeks, it is far from certain what kind of environment this new central bank leader will face as the U.S. economy stands at a potential crossroads.

National Economic Council Director Kevin Hassett is seen as the clearest frontrunner. A report from Bloomberg News last week assessed five competitors likely to succeed current chairman Powell, which has boosted Hassett's profile. Powell's term will expire in May next year.

When asked about this situation last Sunday, Trump told reporters on Air Force One, "Yes, I know who I'm going to choose. We will announce it." Besides that, when asked about Hassett, he just smiled and added, "I won't tell you, we will announce it."

The candidate himself appeared on a talk show last weekend and similarly avoided questions about his prospects. Hassett is one of the candidates, with other competitors including current governors Waller and Bowman, former governor Kevin Warsh, and BlackRock's head of fixed income Rick Rieder.

"I feel very honored to be alongside a group of very excellent candidates," Hassett said on CBS's "Face the Nation." He did mention that the market reacted positively to reports of him being a strong candidate and stated that Americans "can expect President Trump to choose someone who can help them get cheaper car loans and easier access to low-interest mortgages." Not long ago, on Fox News, Hassett simply stated, "If he chooses me, I would be happy to serve."

Recently, the prediction market has rushed to give Hassett a strong probability of obtaining this position. As of Monday afternoon, traders on the Kalshi platform gave a probability of 79%, while the PredictIt platform's probability was 75%, and the Polymarket platform was only 63%. Meanwhile, "no announcement before Christmas" ranked second with a 22% probability, easily surpassing any of the other four final candidates.

Divided Federal Reserve

Regardless of who the final candidate is, he/she will take over a currently divided Federal Reserve. Some officials believe further rate cuts are needed to guard against potential risks in the labor market, while others worry that inflation still poses a threat, and further monetary policy easing could exacerbate this threat.

For the next interest rate decision on December 10, futures market traders have given a probability of 87.6% for a rate cut, while trading in this market has been highly volatile in recent weeks.

Trump and other government officials have publicly stated their preference for lower rates, and Trump has indicated that this is a litmus test for the next chairman. By 2026, the rotating lineup of regional Federal Reserve presidents with voting rights on the Federal Open Market Committee (FOMC) will lean hawkish, meaning they are more inclined to combat inflation and maintain stable rates.

But the upcoming new structure of the Federal Reserve will not only be about interest rates.

In an interview with CNBC last week, Treasury Secretary Mnuchin, who is responsible for the selection of the Federal Reserve chairman, indicated that he prefers to rethink the Fed's mission. "We have reached a point where monetary policy has become very complex, and it's not just about cutting rates," he said, "I think we need to simplify some things."

Calls for Reform

Mnuchin particularly emphasized the role of regional Federal Reserve presidents.

Although their role in setting rates and other monetary policy-related issues is relatively limited—at least compared to the chairman and the board—public statements from these local leaders can sometimes shake the market.

Mnuchin stated that this is part of a broader issue regarding the increasingly large role the Federal Reserve plays in the economy and financial markets. This situation largely began during the financial crisis when the central bank played a key role in implementing a series of plans to guide the economy out of the most severe downturn since the Great Depression.

"I think it's time for the Federal Reserve to step back like it did in the past, calm things down, serve the American people, and set monetary policy on the right track," he said, "All these speeches from the regional Fed presidents… are unnecessary. Why don't they just come out and talk about issues that matter to the American people instead of short-term views on the next meeting?"

The views on regional Federal Reserve presidents are important because they will face reappointment in 2026. While local boards are responsible for hiring regional presidents, it requires approval from the Federal Board. Another issue Mnuchin commented on is that several regional Federal Reserve presidents do not come from the regions they represent.

Mohamed El-Erian, chief economic advisor at Allianz, agrees with Mnuchin's viewpoint.

"We don't need a 'live commentary' Federal Reserve," El-Erian said on CNBC on Monday morning, "We need the Federal Reserve to calm down. We need the Federal Reserve to take a step back and adopt a more visionary macro perspective. We need reform, we urgently need reform. I believe all five candidates on the list are committed to reforming this institution, which is crucial not only for the U.S. but for the global economy."

In the next six months, Wall Street may face a "shadow chairman" situation

Due to Trump's unilateral "war" against Powell this year, the fervor surrounding the nomination has become even more unsettling. Trump had threatened to fire Powell but quickly backed off after the market became tense and volatile due to concerns about the Fed's independence, although questions about the central bank's autonomy have lingered since then.

The chaos is not over: when the future chairman of the Federal Reserve is announced, who will have a greater impact on the market, Powell or his successor? It is certain that the incoming power holder will have more supporters in the White House than the current leadership of the Federal Reserve, but whether they will be equally welcomed within the Fed remains to be seen.

Trump (whether intentionally or not) will realize a vision that Mnuchin proposed earlier this year: during Powell's last few Federal Open Market Committee meetings, a "shadow" chairman will loom over him.

Mnuchin initially suggested that nominations should be publicly announced a year before Powell's term ends in May next year, explaining, "You can make the earliest Federal Reserve nominations, thereby creating a shadow Federal Reserve chairman. Based on the concept of forward guidance, no one will really care about what Powell has to say at that time."

Even before the nomination is announced, commentators have begun to focus on the trajectory of U.S. monetary policy under the new chairman's leadership: "The new Federal Reserve leadership may increase the tendency for easing," UBS Global Wealth Management Chief Investment Officer Mark Haefele wrote in a report to clients on Monday.

He added, "Hassett is viewed as dovish on Federal Reserve policy and has a close relationship with the Trump administration, which leans towards lower rates. If he is indeed appointed, he may reinforce market expectations for a more aggressive rate-cutting cycle, thereby putting further downward pressure on the dollar."

Similarly, UBS Chief Economist Paul Donovan also looked ahead, telling clients that the Senate is unlikely to disrupt the existing arrangements by vetoing Trump's nomination.

"Although the talent pool among the candidates is quite broad, none of the names mentioned are radical enough to prompt the Senate to take an independent stance," Donovan added.

Donovan also noted that Hassett's emergence as a frontrunner "may evoke memories of the disastrous alliance between Nixon and former Federal Reserve Chairman Arthur Burns." "Burns ultimately faced resistance within the Federal Reserve, and the recent voting patterns of the Fed have shown a stronger spirit of independence, so we should be cautious in interpreting the impact of any single individual's actions within the Federal Reserve," he added.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。