As regime change looms at the Fed, one candidate emerges as frontrunner for chair
Kevin Hassett, director of the National Economic Council, speaks with members of the media outside the White House on Friday, October 24, 2025 in Washington, DC, USA.
Francis Chung | Bloomberg | Getty Images
President Donald Trump knows who he will pick as the next Fed chair, but he isn’t saying so yet. Prediction markets have made their decisions, but the frontrunner is also being hesitant.
While this part of the mystery looks set to become clear in the coming weeks, what is far less certain is the type of environment the new central bank leader will face at a potential turning point for the U.S. economy.
National Economic Council Director Kevin Hassett has been named the clear favorite, bolstered by a report in Bloomberg News last week that blocked the five-person race to replace current Chairman Jerome Powell, whose term expires in May.
Asked about the situation on Sunday, Trump told reporters aboard Air Force One: “I know who I’m going to pick, yes. We’ll announce it.” On top of that, when asked about Hassett, he grinned and added: “I’m not telling you, we’ll announce it.”
The candidate also avoided questions about his candidates by making the rounds in person on the weekend speaking tour. Hassett is part of a field that also includes current Governors Christopher Waller and Michelle Bowman, former Governor Kevin Warsh and BlackRock fixed income chief Rick Rieder.
“I’m truly honored to be among a group of truly amazing candidates,” Hassett said Sunday on CBS’ “Face the Nation.” Stating that markets reacted positively to the report that he emerged as the favorite, he stated that Americans “can expect President Trump to choose someone who will help them and have easier access to cheaper car loans and lower interest mortgages.”
Shortly before that, on Fox News, Hassett said only, “If he chooses me, I’ll be happy to serve.”
Prediction markets have been closed to racing lately and there are strong odds Hassett will get the job. As of Monday afternoon Kalshi while traders set a 79% probability Guess put the chance at 75% and polymarket At just 63%, “no announcement by Christmas” had the second highest probability of 22%, easily beating out any of the other four finalists.
A divided Fed
The real choice is who will head the Fed They are divided between officials who think further interest rate cuts are necessary to stave off potential problems in the labor market and those who worry that inflation remains a threat that will worsen with further easing of monetary policy.
Futures market investors are predicting an 87.6% chance of a cut for the next interest rate decision on Dec. 19 in trading that has been highly volatile in recent weeks.
Trump and other administration officials have expressed a preference for much lower rates, and the president has stated that this is a litmus test for the next president. In 2026, members of the rotating cast of regional chairmen who receive votes on the Federal Open Market Committee will have a hawkish bent, meaning a preference for fighting inflation and keeping rates steady.
But the next Fed regime will be about more than interest rates.
In an interview with CNBC last week, Treasury Secretary Scott Bessent, who is leading the Fed’s search for a chairman, said he favors rethinking the Fed’s mission.
“We’ve gotten to the point where monetary policy has become very complex, and it’s about more than just lowering interest rates,” he said. “I think we need to simplify things a bit.”
call for reform
Bessent particularly emphasized the role of regional presidents.
Although they play a relatively limited role in setting rates and other matters related to monetary policy — at least compared to the president and the Board of Governors — public comments from local leaders can occasionally move markets.
Bessent said this is part of broader issues related to the outsized role the Fed has come to play in the economy and financial markets since the financial crisis, in large part when the central bank played a key role in implementing programs aimed at rescuing the economy from its worst downturn since the Great Depression.
“I think it’s time for the Fed to step into the background as it has been, to calm things down and work for the American people, get monetary policy on a good track,” he said. “All this talk by these bank presidents…it’s just unnecessary. Why don’t they go out and talk about meaningful issues to the American people instead of the short-term outlook of the next meeting?”
His perspective on regional presidents is important for their reappointment in 2026. Local boards are subject to approval by the Board of Governors when hiring presidents. Another issue that Bessent also commented on was that some presidents were not from the regions they represented.
Mohamed El-Erian, Allianz’s chief economic advisor, applauded Bessent’s view.
“We don’t need one Fed at a time,” El-Erian said on CNBC Monday morning. “We need the Fed to calm the situation. We need the Fed to step back and take a bigger, visionary view. And we need reforms. We desperately need reforms. And I think all five people on the short list are committed to reforming this institution that is critical not just to the United States but to the global economy.”
