Fed Chair race heats up as Powell may fully exit, raising stakes for Trump's next pick

Fed Leadership Change Brewing: Trump Increases Pressure, Powell's Future Unclear

On July 15 local time, U.S. Treasury Secretary Besent confirmed for the first time that the selection process for the chair of the Federal Reserve has fully commenced. This marks the possibility of an early end to Powell's term, with the selection process officially entering a substantive phase. Trump once again publicly criticized, stating Powell was "disappointing" and blaming his monetary policy for dragging down the U.S. economy.

In Washington's political atmosphere, the Trump administration's intervention in the Federal Reserve is becoming more direct. Analysts generally believe that this move not only reflects the White House's dissatisfaction with the current high-interest rates but is also aimed at prompting another round of rate cuts that align with Trump's economic agenda through leadership changes.

Trump's Stern Words: Rates Should Be Below 1%, Is Powell a "Scapegoat"?

In a speech on July 14, Trump once again lambasted Powell as "unfit for the role" and openly stated that interest rates "should be below 1%." Currently, the federal funds rate target range remains at 4.25%—4.50%, and Trump's remarks are undoubtedly intended to force the Federal Reserve to act quickly to implement a greater degree of monetary easing.

Despite the Federal Reserve's consistent emphasis on "independence," with inflation slowing for consecutive months and employment cooling, Trump is using this trend of inflation "peaking" to intensify pressure on the central bank's senior officials.

Kevin Hassett in the Limelight, White House Prefers "Loyal Technocrat"

Among the hot candidates to replace Powell, Kevin Hassett is notably prominent. At 63, he has served as the head of the Economic Council in the Trump administration and has long been considered a "think tank" for economic policy within the White House. Familiar with Trump's economic policies and possessing both academic background and resources within conservative circles, Hassett has struck a balance between politics and professionalism.

Market analysts believe that Hassett has the ability to transform Trump's intentions into policy without causing severe backlash within the Federal Reserve. This "controllable and professional" image is exactly what Trump needs.

Behind the Many Contenders: Central Bank Independence Faces Unprecedented Test

Besides Hassett, former Federal Reserve Governor Kevin Warsh, current Governor Christopher Waller, and Besent himself are also on the list of potential candidates. Recently, Waller has hinted at supporting a swift rate cut, in line with Trump's intentions, while Warsh is seen as the "missed best candidate," closely tied to the Republican Party.

Regardless of who the final candidate is, the next Federal Reserve Chair will face a dual challenge: meeting the President's expectations for policy easing while maintaining market confidence in the central bank's "depoliticization." Especially against the backdrop of lingering "aftershocks" of high inflation, if the Federal Reserve is perceived as "subservient to politics," its global credibility will face a significant impact.

Powell's Stay or Departure in Focus, "Full Withdrawal" Likely to Increase

Besent has made it clear that if the chair is replaced, retaining Powell in a governor position would be "detrimental to market stability," revealing that the Federal Reserve's usual practice is "to retire completely once leaving office." This is seen as a signal that Powell will leave the Federal Reserve system entirely to avoid future policy impacts from "former influence."

The power transition at the Federal Reserve is evolving from a regular internal appointment to a political contest affecting global financial markets. The next chairperson will not only be a monetary policy maker but also the "vanguard" of Trump's governance.

With global attention focused, a personnel change in Washington may open a new chapter in the future direction of U.S. economic policy.

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