President Donald Trump last week offered his strongest suggestion yet that he’s selected a replacement for Federal Reserve Chair Jerome Powell. Investors harbor worries.
Following months of conjecture regarding the names of the approximately twelve prospects, Trump finally declared last week he knows whom he will propose for the most influential position in the US financial system. Merely days later during a Cabinet session, Trump highlighted National Economic Council Director Kevin Hassett as “a prospective Fed chair,” adding, “May we utter that?”
The 10-year Treasury yield increased by 11 basis points after a Monday report from Bloomberg on November 25 stated Hassett was the “frontrunner” to lead the central bank. And bond investors informed the Treasury Department earlier last month that they were apprehensive Hassett would advance efforts to reduce borrowing expenses substantially to satisfy Trump, according to the Financial Times, citing unnamed sources familiar with the situation.
That feeling was mirrored in private discussions the department held with “leaders at major Wall Street firms, asset administration behemoths and other significant participants in the US debt market,” per the publication.
The unease emerges at a juncture when policymakers are divided on the course for interest rates. They are anxious that Hassett, a long-standing Trump supporter, would prioritize adhering to the president’s directives over upholding the Fed’s autonomy to establish interest rates without governmental intrusion — despite the Fed chair possessing only a single vote.
Their apprehensions hold weight because markets could react violently and compel Trump to retract his nomination of Hassett, constituting an awkward reversal.
“Markets genuinely function as a reality assessment for policy and other significant determinations,” observed Angelo Kourkafas, senior global investment strategist at Edward Jones.
Trump’s choice for Fed chair was already complicated considering Fed regulations concerning eligibility for the chair role. Reorganizing his senior economic advisors would introduce further intricacy. And Fed Governor Lisa Cook’s status on the Board is also ambiguous as the courts ascertain if Trump can dismiss her.
Nervous Regarding Hassett
“The market is already attempting to ascertain how lenient or strict the next Fed chair might be,” remarked Tom Porcelli, Wells Fargo’s chief economist. “However, you cannot truly know how someone will conduct themselves in a post once they are actually seated there.”
As an independently financed institution, the Fed’s capacity to make rate determinations free from political influence is a primary rationale investors trust in the US economy’s stability. Officials globally often desire to generate cheap capital to aid in electoral success. However, that risks inflating economies and driving up inflation — long-term hazards many officials might overlook to concentrate on short-term elections.
Should investors lose that confidence in the Fed, they might seek a greater return for lending the nation funds via US Treasuries or alternative instruments. The paradox is that those elevated bond yields would likely raise long-term interest rates regardless.
But the framework of the Fed’s rate-setting body could help protect against political swaying: The Fed chair is merely one participant among 12 and cannot unilaterally negate the majority’s conclusion.
“There is a committee for a rationale, and if the committee disagrees with the chair, then it is plausible that the chair loses a ballot, which has not occurred previously,” he stated.
A Complex Situation
The Fed chair is not the sole economic office currently under consideration. There exists an entire network of Trump advisors who may be shifting roles or even occupying concurrently related posts.
If Trump selects Hassett to head America’s central bank, the president will need to locate another individual to direct the NEC, which coordinates White House economic strategy.
Trump’s advisors have proposed the prospect of Treasury Secretary Scott Bessent directing the NEC while retaining his Treasury secretary function, according to Bloomberg. Last week, Trump reaffirmed he would readily choose Bessent as Fed chair, although the Treasury secretary has repeatedly indicated he prefers to retain his present capacity.
Trump must also consider the Council of Economic Advisers. The chair of the CEA is Stephen Miran — who is presently on temporary leave to fulfill a term as a Fed governor in an unprecedented arrangement. Since joining the Fed in September, Miran has supported substantial rate reductions, differing from the majority’s decision to ease rates by a quarter point at both the September and October meetings.
Miran’s tenure on the Fed concludes at the end of January, but in response to inquiries from senators during his confirmation hearings, Miran stated that he will not pledge to step down until a successor has been proposed and confirmed.
Personnel paint an eagle sculpture on the Marriner S. Eccles Federal Reserve Board Building, the primary offices of the Board of Governors of the Federal Reserve System on September 16, 2025 in Washington, DC.
Personnel paint an eagle sculpture on the Marriner S. Eccles Federal Reserve Board Building, the primary offices of the Board of Governors of the Federal Reserve System on September 16, 2025 in Washington, DC. Kevin Dietsch/Getty Images
Per Fed statutes, the chair can be chosen solely from sitting Fed governors, and currently, there is no vacancy on the Board. Powell’s leadership period finishes in May, but he is serving a concurrent tenure as a governor extending to 2028. Powell has not disclosed whether or not he intends to remain on the Board after his term as chair concludes. Fed chairs usually resign entirely once their four-year period finishes, if they are not put forth again.
Trump could also exchange Hassett for Miran, then advance him to chair in May; or Trump could wait and anticipate that Powell will announce his retirement next year and have both Miran and Hassett at the Fed. In the latter event, Trump would then (theoretically) need to name substitutes to head the NEC and CEA.
Independently, Governor Lisa Cook’s lawsuit contesting Trump’s endeavor to dismiss her over unsubstantiated accusations of mortgage deception can also influence the composition of the Fed’s influential Board.
Trump in August declared he fired Cook, the initial occasion in the Fed’s century-plus history that a president has endeavored to remove an active governor. Cook replied through the judiciary, and the Supreme Court is slated to rule on the matter next year.
If Cook loses her case and is substituted, Trump would have effectively molded the majority of the Board at a time when the central bank’s governmental impartiality is a contentious subject.
“There is apprehension about a politicization of the Fed resulting in an unnecessarily high level of inflation eventually,” English commented. “The market could ultimately react negatively if a new chair arrives and the committee, for whatever cause, agrees to decrease rates more than is warranted.”
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