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Markets are already reacting to unconfirmed reports that US President Donald Trump has selected a successor to Fed Chair Jerome Powell. Although Trump is still interviewing potential candidates, he strongly hinted on Tuesday that he had a preferred candidate. According to press reports, that would be current National Economic Council (NEC) Director Kevin Hassett.

Hasset would match the pattern of Trump’s prior Fed appointments. He’s picked people of confidence from among his economic advisory staff in an effort to direct monetary policy. His previous appointment was Stephen Miran, who took a leave of absence from his job as Chair of the Council of Economic Advisors (CEA). The CEA is a sister organization to the NEC, with both charged with providing economic advice to the President. Since his appointment to replace Adriana Kugler earlier this year, Stephen Miran has consistently advocated for and voted for significant rate cuts.
 

Who is Kevin Hasset?

Interestingly, Hasset had the same job as Miran during the first Trump administration, suggesting even stronger parallels between the two men. Hasset also has experience within the Fed, having worked as an economist in its Division of Research and Statistics. However, compared to other candidates who are actually governors in the Fed, he’d be a relative outsider.

In public appearances and in his regular work at the NEC, Hasset has insisted that economic conditions require lower interest rates. His policy positions on monetary policy echo those of Trump, albeit without the calls to fire current Fed Chair Jerome Powell. If he is ultimately selected and confirmed, he would replace Powell at the end of his term in May of next year.
 

Will the Trump Appointee Cut Rates?

An interesting question that’s worth considering in the current climate is how much power the Fed Chair actually has over interest rates. The FOMC is composed of 12 members, and almost always votes unanimously for policy changes. Over the last two meetings, there have been rare dissenting votes, indicating an unusual level of division among members.

But it’s not up to the Fed Chair to set monetary policy; in the end, his vote counts just as much as the other members’. However, as Chair of the Board, he has the prerogative to raise certain issues for discussion and direct attention to specific factors. So, merely selecting a new Chair won’t be enough to implement Trump’s demand for unilaterally cutting rates. Over time, Trump will have the option to appoint more governors as their terms expire, giving him more leverage over the Fed. However, the economic situation can change, and we should remember that Trump initially appointed Powell after strongly criticizing his predecessor, Janet Yellen.
 

What About Other Candidates?

Another leading candidate is current Fed Governor Christopher Waller, who has also supported significant rate cuts. In the end, it might not matter which of the ultra doves Trump chooses, since the market will expect rate cuts no matter who gets the job. This would likely weaken the dollar and continue to support gold prices. However, if the stock market rises commensurately, an inflow of capital could support the dollar.

Treasury Secretary Scott Bessent is leading the interview process, and he’s notably come under fire from Trump over his frustration with lowering interest rates. The White House is concerned about the enormous interest bill the Treasury must pay to service the debt. Interest payments are the third-largest outlay for the federal government, eclipsing even defense spending. The calls for monetary policy easing might have more to do with public finances than the actual state of the US economy.

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