Hassett Emerges as Frontrunner to Succeed Powell as Fed Chair

Kevin Hassett, one of President Trump's longest-serving economic aides, is an early frontrunner to succeed Jerome Powell as Federal Reserve chair, according to people familiar with the process. Hassett, along with former Fed Governor Kevin Warsh, are considered two of the top contenders in what is described as an 'apprenticeship'-style contest being run by Trump from the White House.

Treasury Secretary Bencent is providing advice on the selection, but he could also be in the running himself if others fail to impress Trump. Current Fed Governor Waller remains a dark horse.

Trump has heightened the stakes by routinely criticizing Powell for keeping interest rates too high and stating he would pick a Fed chair who would want to cut rates. This has raised investor concerns about the Fed’s independence from political pressure – crucial to its ability to fight inflation and support the dollar.

Hassett's Criticism of the Fed

Hassett himself has echoed Trump’s criticisms of the Fed. In a Fox Business interview this month, he noted the Fed is an independent institution. But he said the Fed merited Trump’s sharp criticism for cutting rates ahead of last year’s presidential election and then recently holding steady due to inflation risks from tariffs.

“I think that triggered a ghostly worry that they weren’t non-partisan, that they weren’t independent,” Hassett said.

'Serving Trump'

Once viewed as a staid right-leaning economist aligned with politicians like Mitt Romney, Hassett has now spent nearly a decade in Trump’s orbit. His handling of his National Economic Council work has been a sharp contrast from predecessors like Gary Cohn, who tried to restrain the president’s tariff impulses and was quickly ousted.

By contrast, Hassett has gone full “MAGA,” amplifying Trump’s grievances on trade, taxes, inflation or the Fed in countless TV appearances.

Stephen Myrow of Washington research firm Beacon Policy Advisers argues this is what’s required to survive in Trump’s world.

“Anyone who’s survived that long in Trump’s orbit, they didn’t come in with an ideology they wanted to advance,” Myrow said. “They aren’t going in to serve some monetary school of thought, they are going in to serve Trump.”

It remains to be seen how that spirit of service will apply to the next Fed chair, a position that is supposed to be insulated from government priorities. A key aspect of this insulation is the central bank's ability to operate without political interference, allowing it to make decisions based purely on economic data and forecasts.

Potential Impact on Markets

This is also a multi-trillion dollar question. Economists say independent central banks are better at tamping down inflation, so a Fed chair viewed as acquiescent to the White House could trigger a selloff in government bond markets. Trump’s threats to fire Powell exacerbated financial jitters triggered by his trade war.

Trump, in contrast, has adopted the opposite strategy, believing excessively high Fed interest rates add hundreds of billions of dollars to U.S. debt servicing costs each year.

'Most Qualified Person'

Bencent said Tuesday the process of picking Powell’s replacement has formally begun. Aside from the Treasury Secretary, the core circle of aides involved includes White House Chief of Staff Susie Wiles – who advises Trump on key personnel decisions and is politically savvy, striving to ensure the U.S. economy is booming ahead of next year’s midterm elections.

Trump’s allies say Trump is deeply involved in the selection. One adviser predicted interviews will occur quickly, as Trump tends to act immediately once he gets an idea in his head.

Hassett has reportedly been telling people inside and outside of the government he very much wants the job, although he was coy when asked about it on air.

Asked Tuesday if Bencent was the front-runner to lead the Fed, Trump said he was “an option” and praised the Treasury Secretary for “the job he’s doing.”

White House spokesman Kush Desai said, “With Biden’s inflation crisis now behind us, President Trump has made clear that the Fed’s monetary policy needs to complement this Administration’s pro-growth agenda, and he will continue to nominate the most qualified person who can best serve the American people.”

As National Economic Council director, Hassett benefits from daily access to Trump, with an office in the West Wing. Warsh, by contrast, spends most of his time shuttling between the Hoover Institution in California and New York City.

Trump previously interviewed Warsh, the former Fed Governor, for the chairman job in 2017 but ultimately went with Powell because he felt Warsh’s views were too hawkish and he looked too young for the job.

Hassett served as chair of the Council of Economic Advisers in Trump’s first term, and his earlier career included stints as an economist at the Fed and a research director at the American Enterprise Institute. He is also known as a tax expert and has written extensively on the topic.

His most “infamous” book, however, is “Dow 36000,” which predicted a massive rise in the U.S. stock market, but it was published shortly before the dot-com bubble burst, and the Dow didn’t ultimately reach the level predicted in his title for more than two decades.

'Utter Chaos'

During Trump’s years of Florida “exile” between his first and second terms, Hassett – then doing some work for Jared Kushner’s investment fund Affinity Partners – also regularly met with Trump to discuss economic ideas.

A long-time friend of Hassett said the two are similar in the way they view the world.

Trump has been unhappy with Powell almost since appointing him to the Fed’s top job. In Trump’s second term, the complaints escalated to public fury, and he gave Powell the nickname “Mr. Late” and frequently resorted to harsher insults.

The Powell-led Fed has held interest rates steady this year, after cutting them by a percentage point in the final months of 2024. Fed policy makers have said there’s no need to rush to cut rates further, pointing to solid growth, a healthy labor market, and that they need time to observe whether tariffs push up inflation as most economists expect.

So far, there hasn’t been a major tariff-driven spike in consumer prices – though June data released Tuesday contained signs that companies are starting to pass along trade-related costs. That bolstered expectations that the Fed will again stand pat at its next rate meeting July 29-30. Markets still expect a couple of rate cuts before year-end.

Hassett, in his Fox interview, echoed Trump’s “too late” taunt, faulting the Fed for being “behind the curve” compared to the practices of other central banks. He also joined other Trump aides and Republican lawmakers in raising alarms about soaring renovation costs at the Fed’s headquarters, which has become the president’s latest stick to beat Powell with.

One purpose may be to pressure Powell to leave the Fed entirely when his term as chair ends next May, rather than remaining as a governor, a position to which his term runs until 2028.

The administration’s argument is essentially that Trump’s Fed pick – whether it’s Hassett or someone else – needs a clear “runway” to operate.

“The tradition is that the Fed chair also resigns as a governor when they leave the job,” Bencent said Tuesday. “There’s been a lot of discussion about a ‘shadow Fed chair’ causing chaos even before they’re nominated. And I can tell you, I think if a former Fed chair were to continue to stay on, that would be utter chaos for the markets.”