Hassett likely next Fed chair, but most think Trump should nominate someone else, CNBC Fed survey shows
While markets expect Kevin Hassett to be named the next Federal Reserve chairman, it’s clear he’s not the choice of CNBC Fed Survey participants.
According to the survey conducted in December, 84 percent of respondents believe that President Donald Trump will nominate National Economic Council Director Hassett to head the central bank. But only 11% think that’s what the president should do. Fed Governor Christopher Waller is the favorite of 47% of respondents, followed by Kevin Warsh with 23%. But only 5 percent of those polled think Trump will choose either.
Concerns about Hassett appear to stem from his commitment to the Fed’s dual mandates and independence. 76 percent of those surveyed think the next Fed chair will be more dovish than the current Fed chair, Jerome Powell, meaning he will cut interest rates more quickly if labor markets weaken and be slower to raise interest rates in the face of above-target inflation. A majority of 51 percent believe the next Fed chairman will carry out the president’s wishes to cut interest rates, while 41 percent believe he will act independently.
Coming into this week’s meeting, attendees are expecting a hawkish interruption, meaning an interruption followed by a pause. But there are also deep disagreements about whether the Fed should cut back.
While 87 percent believe the Fed will lower interest rates, only 45 percent think it should. Divided opinions are expected, with only 35% predicting a cut in January.
“GDP is running at around 4%, inflation is above target, financial conditions are fairly easy, and the deglobalization of product and labor markets continues,” said Richard Bernstein, CEO of Richard Bernstein Advisors. “Given this background, it is not advisable to ignore the inflation risks associated with further rate cuts.”
Scott Wren of the Wells Fargo Investment Institute added: “The Fed will cut in December, even though you can make a very logical argument that it shouldn’t do anything.”
The growth outlook is improving and remains at 2% this year and slightly higher next year. Inflation is predicted to remain above the 2% target for the next few years.
“Continued high inflation” ranks as the No. 1 risk to the economy, up from No. 4 in October, followed by concerns about the AI bubble bursting.
Diane Swonk, chief economist at KPMG, said: “Many underappreciate the likely stimulus due to record tax refunds in the first half of 2026. This also means we are likely underestimating the risk of inflation persisting.”
There doesn’t seem to be much downside in the job market either, with unemployment set to rise by just a tenth next year and falling in 2027.
Still, many participants believe the Fed should cut back because of actual or projected weakness in the labor market.
Allen Sinai of Decision Economics wrote: “The Federal Reserve is behind the curve again, this time due to widespread weakening in the labor market. A “preemptive” 50 basis point cut in the federal funds rate is the right thing to do.”
Survey respondents expect the S&P 500 to rise 6% next year and another 6% in 2027, despite growing concerns that AI stocks are in a bubble. 90% think AI stocks are overvalued, compared to 79% in October. AI stocks are said to be overvalued by an average of 21 percent. Meanwhile, 60% of respondents think the level of systemic risk in US credit markets is “somewhat higher” than 53% in October.
