Kevin Hassett: A Leading Contender for Fed Chair?

According to reports from the Wall Street Journal, Kevin Hassett, a top White House economic advisor, is emerging as a leading candidate to potentially replace Jerome Powell as the Chair of the Federal Reserve. This comes as President Trump seeks to appoint a Fed Chair more aligned with his economic stances.

While the selection process remains uncertain, sources familiar with the matter suggest that Hassett, the director of the National Economic Council and a core economic advisor during Trump's first term, possesses unique advantages compared to other contenders.

Hassett's Core Competencies

Hassett, 63, is among at least four candidates being considered for the Fed Chair position, individuals Trump believes would be more responsive to his calls for interest rate cuts than the current chair, Powell. When asked about firing Powell, Trump stated he wouldn't but characterized Powell's performance as "terrible," believing rates should be lowered by another 3 percentage points.

Hassett's close relationship with Trump, spanning nearly a decade, is seen as a significant strength. He is among the few who have successfully earned the president's favor and maintained his trust. Hassett served in two roles during Trump's first term, later joining a private equity firm founded by Trump's son-in-law, Jared Kushner, and advising on economic policies during Trump's 2024 presidential campaign.

Hassett's tenure, coupled with his academic credentials and strong connections in conservative economic circles, contribute to his rising status among Trump allies who advocate for Fed reform. Additionally, he is viewed as a disciplined and effective media spokesperson – a trait Trump has long valued in high-level appointments.

Krishna Guha of Evercore ISI noted that the market is increasingly recognizing Hassett's significant advantage in the race to succeed Powell.

"Hassett’s main challenge is to convince the market that while he is a Trump loyalist, he can maintain sufficient independence as Fed chair to preserve Fed credibility," Guha said.

Potential Challenges and Considerations

Regardless of whom Trump appoints to lead the Fed, they must tread carefully, balancing the Fed’s “independent” monetary policy objective with responding to the President’s public pressure to lower interest rates. The next Fed Chair may face intense scrutiny from financial markets and within the Fed itself, with officials watching to see if “political fealty will sacrifice the central bank’s credibility in fighting inflation.”

"Proximity to Trump may be an advantage in getting the appointment, but it’s not necessarily an advantage in doing the job," said Jon Hilsenrath, a visiting scholar at Duke University’s economics department, who focuses on central bank issues.

Potential Competitors and Profiles

Hassett faces competition from other candidates, including former Fed Governor Kevin Warsh, Treasury Secretary Scott Bessent, and Fed Governor Christopher Waller, each with unique strengths:

• Warsh: Has strong ties to Republican economic circles and Trump.
• Bessent: Is seen as a trusted policy advisor and a key link to Wall Street.
• Waller: As a current Fed official, he is familiar with the central bank's thinking.

Hassett also embodies a notable shift. He previously defended the Fed’s independence and policy decisions. However, he has now criticized the Fed's rate cut last September as a “political maneuver to help Vice President Kamala Harris' campaign.”

In conclusion, the appointment of a new Fed Chair remains a crucial decision with significant implications for the US economy. President Trump will have to balance political loyalty, economic expertise, and the ability to maintain central bank independence in the face of political pressure.