Is he the next Federal Reserve Chairman? Decoding the power game that led to Hassett's victory.

Author: Xiao Yanyan, Jinshi Data

On the surface, the selection process for the new Federal Reserve Chair is still underway. A small number of final candidates are scheduled to begin interviews this week with Vice President Vance and senior White House staff.

However, in reality, the process appears to be nearing completion, with Trump seemingly favoring his longtime advisor Kevin Hassett. If Hassett is ultimately nominated, it will be because he meets two of Trump's key criteria: loyalty and credibility in the markets.

“I know who I’m going to choose,” Trump told reporters last Sunday. When asked if Hassett was his choice, Trump smiled but did not elaborate.

Since Labor Day, Treasury Secretary Bessett has been overseeing a methodical selection process, narrowing down the initial 11 candidates to five: current White House National Economic Council Director Hassett, former Federal Reserve Governor Kevin Warsh, current Federal Reserve Governors Waller and Bowman, and BlackRock executive Rick Rieder. This summer, Warsh was considered a frontrunner alongside Hassett. However, those who have recently spoken with Warsh give the impression that he no longer sees his situation that way. Neither Hassett nor Warsh responded to requests for comment. White House spokesman Kush Desai said, "Discussions about the Federal Reserve nominee are speculative until President Trump makes a formal announcement." According to sources, Hassett had told White House and other government officials that he desired the position and considered himself the best candidate. Hassett's close relationship with Trump has paid off, as other contenders did not have the same opportunity to demonstrate their loyalty. He served as chairman of the White House Council of Economic Advisers from 2017 to 2019, before briefly returning as a senior advisor after the COVID-19 outbreak in 2020. He became director of the National Economic Council when Trump returned to the White House in January. Last week, Hassett passed another test: long-term interest rates fell after a report that he was the frontrunner for Federal Reserve chairman. Last Sunday, Hassett used this as evidence that he could meet Trump's demands for lower interest rates without sacrificing his credibility on inflation. "I think the American people can expect President Trump to choose someone who can help them get cheaper auto loans and easier access to mortgages at lower rates. That's what we're seeing in the market's reaction to the rumors about me," Hassett said on CBS. Choosing a successor to Powell, who will step down next May, is arguably Trump's most influential personnel decision of his second term, and has now become a public spectacle: a months-long, public-facing campaign in which candidates vie for attention on television between interviews with Bessett. The final candidates have already met with Bessett. Sources say they will begin meeting with Vance and other White House staff this week, before meeting with Trump. Bessant had indicated that Trump might announce his nominee before Christmas. Although Trump stated he had made his decision and all indications pointed to Hassett as his first choice, those following the process noted that he could still change his mind. According to sources directly familiar with the matter, just last week, Trump was discussing with allies who should be the next Federal Reserve Chair. This person stated that Trump urged allies to explain their reasons for supporting either Hassett or Warsh. One source said that some told Trump that Warsh did not have the same close professional relationship with him as Hassett, and also pointed out that choosing Hassett would mean losing a key figure as the Director of the National Economic Council. Another person who had discussed the decision with Trump stated that Bessant remains the only candidate who could potentially prevent Hassett from being "crowned" as Federal Reserve Chair. Bessett has ruled out running for the position both privately and publicly. However, according to another source with direct knowledge of the matter, Trump told allies last week that he greatly admires Bessett and still likes to consider him a potential candidate for Federal Reserve Chair. Besides his loyalty to Trump, Hassett's candidacy is also supported by his PhD as an economist, his publications, and his experience as a staff economist at the Federal Reserve. He has a solid conservative background and was confirmed by the Senate in 2017 with broad bipartisan support to chair the Council of Economic Advisers. Nevertheless, Hassett's candidacy has raised concerns among some former colleagues who question whether he possesses the composure required for the role and the courage to withstand pressure from Trump if necessary. Some of those who helped him secure the nomination for the Council of Economic Advisers in Congress later became troubled by his public criticism of the Federal Reserve. The process of appointing a Federal Reserve chairman is becoming one of the most unusual in decades. Since Alan Greenspan succeeded Paul Volcker in 1987, every new Fed chairman has pledged to maintain policy continuity to promote market stability. But this time, **candidates have to distance themselves from Powell's policies.** Eight years ago, Trump chose then-Fed Governor Powell as chairman, but he quickly became dissatisfied with his choice. While Hassett had been a staunch defender of the importance of central bank independence during Trump's first term, this year he has joined Trump in sharply criticizing the Fed and Powell. This summer and last month, he repeatedly accused the Fed of partisan bias for not cutting rates more aggressively, an accusation refuted by almost all of the central bank's policymakers. Powell's willingness to resist Trump's demands has enhanced his standing among economists and investors who value the Fed's independence. Hassett, who spent months publicly attacking his future colleagues during his bid for the position, will have to prove his credibility to them and the markets while maintaining the loyalty that won him the job. The Fed has cut rates at its last two meetings, but some officials are hesitant about further cuts (including at next week's meeting) as they need to weigh the competing concerns of a weak labor market and stickier inflation. The above content is from Nick Timiraos, a renowned Wall Street Journal reporter often referred to as the "Fed's mouthpiece."