Written by: Xiao Yanyan, Jin Ten Data
On the surface, the selection process for the new Federal Reserve Chair is still ongoing. A few final candidates are scheduled to begin interviews with Vice President Vance and senior White House staff this week.
However, in reality, this process seems to be nearing its conclusion, with Trump appearing to favor his longtime advisor Kevin Hassett. If Hassett ultimately receives the nomination, it will be because he meets two key criteria for Trump: loyalty and credibility in the market.
"I know who I'm going to choose," Trump told reporters last Sunday. When asked if the choice was Hassett, Trump smiled but said no more.
Since Labor Day, Treasury Secretary Bessent has been methodically overseeing the selection process, narrowing the initial pool of 11 candidates down to five: current White House National Economic Council Director Hassett, former Federal Reserve Governor Kevin Warsh, current Federal Reserve Governors Waller and Bowman, and BlackRock executive Rick Rieder.
This summer, Warsh was seen as a frontrunner alongside Hassett. However, those who have spoken with Warsh recently have the impression that he no longer views his situation in the same light.
Hassett and Warsh did not respond to requests for comment.
White House spokesperson Kush Desai stated, "Discussions about the Federal Reserve nomination are speculative until President Trump makes a formal announcement."
According to insiders, Hassett has expressed to the White House and other government officials that he is eager for the position and believes he is the best candidate.
Hassett's close relationship with Trump has paid off, as other competitors do not have the same opportunity to prove their loyalty to Trump. He served as the Chairman of the White House Council of Economic Advisers from 2017 to 2019 and briefly returned as a senior advisor after the outbreak of the COVID-19 pandemic in 2020. When Trump returned to the White House in January, he took on the role of National Economic Council Director.
Last week, Hassett passed another test: long-term interest rates fell after a report indicated he was the frontrunner for Federal Reserve Chair. Last Sunday, Hassett cited this as evidence that he could meet Trump's demand for lower interest rates without sacrificing credibility on inflation issues.
"I think the American people can expect President Trump to choose someone who can help them get cheaper auto loans and easier mortgages at lower rates. That's what we see in the market's reaction to the rumors about me," Hassett said on CBS.
The selection of Powell's successor, who will step down next May, can be considered Trump's most influential personnel decision of his second term, and it has now become a public "performance": a months-long campaign in the public eye, with candidates vying for attention on television while undergoing multiple interviews with Bessent.
The final candidates have met with Bessent. Insiders say they will begin meeting with Vance and other White House staff this week, followed by meetings with Trump. Bessent has indicated that Trump may announce his nominee before Christmas.
Although Trump has stated that he has made a decision and all signs point to Hassett as his first choice, those following the process note that he could still change his mind.
According to individuals directly familiar with the matter, just last week, Trump was still discussing with allies who should be the next Federal Reserve Chair. This person indicated that Trump had urged allies to articulate reasons for supporting either Hassett or Warsh.
One individual stated that some people told Trump that Warsh does not have the same close professional relationship with him as Hassett does, while also pointing out that if he chooses Hassett, he will lose a capable aide in the National Economic Council Director role.
Another person who has discussed this decision with Trump indicated that Bessent is currently the only potential candidate who could obstruct Hassett's "coronation" as Federal Reserve Chair. Bessent has privately and publicly ruled out the possibility of running. However, according to another insider, Trump told allies last week that he greatly appreciates Bessent and still likes to consider him a potential candidate for Federal Reserve Chair.
In addition to loyalty to Trump, Hassett's candidacy is bolstered by his status as a PhD economist, having published works, and having served as a staff economist at the Federal Reserve. He has solid conservative credentials and was confirmed as Chairman of the Council of Economic Advisers in the Senate with broad bipartisan support in 2017.
Nevertheless, Hassett's candidacy has raised doubts among some former colleagues, who question whether he possesses the steady temperament required for the role and the courage to withstand pressure from Trump when necessary. Some who helped him secure support for his nomination as Chairman of the Council of Economic Advisers later expressed discomfort with his public criticism of the Federal Reserve's actions.
The process of succeeding the Federal Reserve Chair is evolving into one of the most unusual in decades. Since Alan Greenspan succeeded Paul Volcker in 1987, every new Federal Reserve Chair has committed to maintaining policy continuity to promote market stability. But this time, candidates must distance themselves from Powell's policies. Eight years ago, Trump chose Powell, then a Federal Reserve Governor, as Chair, but he quickly became dissatisfied with his choice.
Although Hassett firmly defended the importance of central bank independence during Trump's first term, this year he has joined Trump in sharply criticizing the Federal Reserve and Powell. This summer and last month, he repeatedly accused the Federal Reserve of partisan bias for not being more aggressive in cutting interest rates, a charge that has been almost universally rebutted by the central bank's policymakers.
Powell's willingness to resist Trump's demands has elevated his standing among economists and investors who value Federal Reserve independence, while Hassett has spent months publicly criticizing his future colleagues during his pursuit of the position, and once in office, he will have to prove his credibility to these colleagues and the market while maintaining the loyalty that won him the position.
The Federal Reserve has cut interest rates at its last two meetings, but some officials are hesitant about further cuts (including at next week's meeting) as they need to weigh competing concerns between a weak labor market and more persistent inflation.
The above content is from Nick Timiraos, a renowned journalist for The Wall Street Journal, known as the "voice of the Federal Reserve."
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