In 12 months’ time a different hand will be guiding the Federal Reserve. Chairman Jerome Powell is due to stand down in May of next year. Different—not new—because some of the candidates President Trump may be eyeing for nomination are already well-known figures in regional and central banking.
The shortlist is getting narrower as the timeline for a nomination announcement draws closer. Last month the president said he would confirm his decision “very soon,” potentially in a bid to shift attention toward the incoming Fed chairman and away from Powell.
This week Trump has also dropped another crumb for spectators: Treasury Secretary Scott Bessent won’t be moving over to the Fed.
Bessent’s name had been circulating for the role courtesy of his background and close relationship to the president. But yesterday Trump told CNBC: “I love Scott, but he wants to stay where he is. I asked him just last night, ‘Is this something you want?’ [Bessent said], ’Nope, I want to stay where I am. He actually said, ‘I want to work with you.’ It’s such an honor. I said, ‘That’s very nice. I appreciate that.’”
Bessent has been clear that he wanted to remain at the Treasury but would go where the president asked him to, saying earlier this year that he had the “best job” in Washington and “would like to stay in my seat through 2029.”
With Bessent removing himself from contention, Trump confirmed he now has four names in mind as potential successors to lead the Federal Open Market Committee. The Oval Office has also made at least one of the criteria clear: The next Fed chairman must be more willing to cut rates.
Option 1: Kevin Warsh
A former member of the Board of Governors at the Fed, Warsh has been seen as a frontrunner for Fed chairman since President Trump took office. Warsh served on the board between 2006 to 2011, acting as administrative governor managing and overseeing the group’s operations, personnel, and financial performance.
Trump has already talked warmly of Warsh, telling reporters on Air Force One last month that Warsh is “very highly thought of.”
Warsh, currently a visiting fellow in economics at the Hoover Institution and a lecturer at the Stanford Graduate School of Business, is bullish on the American economy and has supported calls that Trump 2.0 could usher in a golden era for the nation.
The White House might also like some of the criticism Warsh has leveled at the Fed’s current thinking. Warsh told CNBC a few weeks ago that if he were the president a chief concern would be a Federal Reserve which doesn’t recognize the upsides in economic data.
“What I’d be worried about is a central bank that doesn’t see any of that. A central bank that is stuck with models from 1978, governance from a prior period, and [doesn’t] recognize we could be at the front end of a productivity boom,” Warsh said. “If I were the president, I’d be worried that [the Fed] might not see it and they might think economic growth is somehow going to be inflationary.”
For many years, Warsh has also called for a “regime change” at the Fed, and argued: “it’s not just about a person, it’s about an approach to economics … I’m troubled when I see them moving the goalposts. It is very puzzling to me, how you could think that we should do an emergency rate just last September and now all of a sudden you stand there like a hawk. That’s not good for the institution, I don’t think it’s good for the economy to be changing the goalposts like that.”
Potentially a mark against Warsh’s name is that he has some characteristics of a hawk—those who would keep the base rate higher in order to keep inflation low. In a conversation with the Hoover Institute earlier this month, for example, he outlined price stability is at the core of restoring Fed credibility.
To this end, wrote ING in a note to clients this morning, “Warsh stands out as the most USD-friendly candidate at this stage … We could see the dollar gain support on his nomination.”
Option 2: Kevin Hassett
Warsh isn’t even the only Kevin in contention, Trump revealed. Yesterday he said: “Both Kevins are very good, and there are other people that are very good, too.”
Leading in the polls at present is Kevin Hassett, currently serving as Director of the National Economic Council. Per prediction market Kalshi, Hassett is being priced with a 41% chance of winning the nomination, while Warsh sits at 29%.
Hassett has been an integral figure in Trump 2.0 thus far, supporting on everything from trade deals under the new tariff regime to speaking with House members about key legislation like the ‘One Big, Beautiful Bill Act’.
This very fact may prove to be the reason Trump may steer away from nominating Hassett: It may raise questions about the independence of the Fed.
Despite wanting a friendly face at the head of the FOMC, the White House will be mindful of the fact that the autonomy of the central bank is a fundamental strength of the economy. Trump already learned the hard way how markets react to perceived threats against this independence, after he was forced to walk back a threat to fire Powell and the markets revolted.
Questions of transparency and independence have been rife over the past week after President Trump dismissed the chief of the Bureau of Labor Statistics (BLS) following surprise and significant revisions to labor data reporting. Asked about how he would address such criticisms, Hassett said: “I’m an economist, I’m not a politician. But when politicians look at numbers that make them wonder, then that suggests there needs to be more transparency.”
In a note overnight, Goldman Sachs suggested that further hints about the next chairman could come in the form of a replacement for Fed Governor Adriana Kugler, who resigned last week. Chief U.S. economist, Jan Hatzius, wrote: “If confirmed very quickly, the new governor might be able to participate in the September 16-17 FOMC meeting. This would likely add further support for rate cuts following last week’s two dissents in favor of cuts from Governor Waller and Vice Chair for Supervision Bowman.
“The choice is particularly important because the new governor could well take over leadership of the FOMC from Chair Powell.”
Option 3: Christopher Waller
Governor Waller was a nomination of President Trump’s in 2020, in a term ending in 2030, already marking him as an individual who has earned the notice and respect of the current White House.
But in more recent months, Waller has raised eyebrows as potentially auditioning for the role of Fed chairman. Notably, he was one of two members who dissented against the recent FOMC decision not to cut the base rate from its current level of 4.25 to 4.5%.
As UBS’s Paul Donovan wrote late last week: “Investors are bound to suspect that the rationale amounted to little more than an excited jumping up and down and shouting ‘pick me, pick me’ in the general direction of the White House.”
Waller has lobbied for a rate cut for some time, and hinted that he would like to see a quicker turnaround on when that action may take place. Yet even this has led economists to question whether the governor is a true advocate of a reduction, or is seeking to publicly appeal to the president for the role.
As Jeremy Siegel, emeritus professor of finance at the Wharton School of the University of Pennsylvania, wrote for WisdomTree, where he is a senior economist, last month: “Chris Waller argued … for a potential July rate cut. Is he auditioning to be Powell’s replacement? I agree with Waller, we’re too far above the neutral rate with tariffs coming.”
Option 4: Relative outliers
Elsewhere President Trump could look to FOMC member Michelle Bowman as a potential candidate, for she too dissented against the Fed’s decision to hold rates.
Bowman, vice chair of supervision at the Fed, justified her stance with: “Inflation has moved considerably closer to our target, after excluding temporary effects from tariffs, and the labor market remains near full employment. With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting.”
“In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market.”
And more widely, economist Judy Shelton’s name has also been floated. Shelton was, after all, a Trump nomination to the Fed during his first term but did not receive congressional backing to make it to the board.
At the time many expressed concern about how closely Shelton’s economic analysis was aligned to the president’s—including calls for a larger-than expected cut to rates—and questioned how highly she valued central bank independence.
Since then, Shelton has lobbied for the inflation target (currently set to 2%) to be lowered to zero in order to “make life much less complicated for all of us who have to use the dollar and constantly express things in terms of inflation adjusted.”
