Kevin Hassett is now the lead candidate to be nominated as the next Federal Chair according to prediction markets and media reports. Prediction markets currently give Hassett a 7 in 10 chance of receiving the nomination to replace Jerome Powell from February 2026. According to Bloomberg reporting, Trump has made his choice for Fed Chair so any announcement could come soon. Still, it would be several months until any candidate likely assumed the role of Fed Chair in May 2026.
Hassett is currently Chair of the National Economic Council, he has previously advised various Republican Presidential candidates on economic policy, worked at the Federal Reserve and U.S. Treasury and taught at Columbia Business School.
A Reduction In The Fed’s Independence
If appointed, Hassett’s appointment might mark an incremental reduction in the Federal Reserve’s independence as has been a theme under President Trump. Trump has verbally attacked current Chair Jerome Powell including threats to fire him. Trump has also attempted to fire Fed Governor Lisa Cook, a process which is ongoing and will be before the Supreme Court for oral argument on 21st January.
In 2025, Trump appointed Stephen Miran as a Fed Governor. This was unusual in that Miran was apparently appointed from a role in the Trump administration with a mandate to lower interest rates. Fed candidates are not typically appointed with short-term monetary policy outcomes in mind.
Miran has, so far, dissented from the majority, dissenting by voting for a 0.5% cut in rates at his first two meetings in September and October. Miran outlined his policy views in a September speech calling policy currently very restrictive. Hassett has an apparently close relationship with Trump and may follow a similar line in aiming to move rates lower.
Generally, markets have favored central bank independence over time. That’s because it is believed to lead to superior long-term monetary policy. Lower interest rates might boost the economy in the short term, but may lead to additional inflation over the longer run. The Fed remains an independent institution today, but Trump’s repeated attacks have at least attempted to reduce the institution’s autonomy.
However, in an interview with Politico in October 2025, Hassett did call for greater transparency at the Federal Reserve, saying “An independent Fed is very transparent,” he said. “It tells you, this is what we think the economy is going to look like. They tell you why. They show you their models. They encourage debate about, like, what model is working best right now. They look at their errors and talk about why they made them, and do that in front of the public. So the wisdom of crowds can also affect the wisdom of the Fed. And so I think that the Fed is still kind of this thing that’s like the Wizard of Oz behind the curtain. And that, you know, is something I think in today’s age should change.”
The Limitations Of Fed Chair
However, the power of the Fed Chair is somewhat limited in determining the Federal Funds rate. When it comes to monetary policy decisions, the Chair only has one vote of twelve to set interest rates.
The other votes are made by Fed Governors and Fed Regional Bank Presidents. There are seven total Fed Governors including the Chair. Each is appointed to 12-year terms at staggered intervals. As such, it remains to be seen if any Trump appointee as Chair can sway monetary policy materially. Indeed, the structure of the Federal Open Market Committee is designed to limit short-term political influence. That said, if Trump succeeds in firing Cook, and if Powell resigns, then Trump’s potential influence on the Fed may increase further. That’s especially true, since Michelle Bowman and Christopher Waller are already Trump appointees on the Board of Governors.
Even though Jerome Powell’s term as Fed Chair potentially ends in 2026, he may remain as a Governor until 2028 to serve out the remainder of his 14-year term. Powell staying on as Governor would be unusual, but would reduce Trump’s influence on the Fed, because he may then have to nominate Hassett to replace Miran as a Federal Reserve Governor and then nominate Hassett as Chair. That’s because only sitting Governors can be Fed Chair.
The Impact Of Hassett On Interest Rates
It appears likely that Hassett would be another vote for lower rates on the FOMC. However, it may be that Trump’s attempts to fire Cook and Powell’s potential decision on whether to resign before 2028, or not, would prove just as decisive for monetary policy. Hassett’s nomination, should it occur, would be subject to Senate approval.
The Broader Economic Picture
For now, the economic data remains somewhat finely balanced ahead of the Fed’s next decision on December 10. Inflation is above target and the jobs market appears to be softening. If the jobs market were to weaken further, then it may not take Trump’s influence for the Fed to decide to cut rates aggressively as the economic case for cuts would be less ambiguous. For now, certain jobs data has been delayed by the government shutdown, but it may make the case for lower interest rates in 2026.
What To Expect
If Hassett becomes Fed Chair, then Trump’s calls for lower interest rates will likely get more attention at the Fed. However, the role of the Fed Chair is not decisive in setting interest rates. In fact, even if Hassett is not the nominee other potential Trump appointees for Chair, such as Christopher Waller, Michelle Bowman or Kevin Warsh may push for lower rates.
However, given the nature of policy voting at the Fed, whether Trump can legally fire Cook and whether Powell resigns could end up having just as big an impact on monetary policy in 2026 and beyond.
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