A new chairman of the Federal Reserve is about to emerge, or more actively promote interest rate cuts

U.S. President Donald Trump said on Sunday that he had identified the next chairman of the Federal Reserve. Overseas market news shows that Kevin Hassett, director of the White House National Economic Council and Trump's chief economic adviser, is currently most likely to become the next chairman of the Federal Reserve.
Analysts said that if elected, as one of Trump's right-hand men in formulating economic policies, Hassett may be more proactive in promoting interest rate cuts and lowering the Federal Reserve's policy rate from the current 3.75 - 4.0% to below 3.0%.
The term of current Federal Reserve Chairman Jerome Powell will expire in May next year, and the selection of a new chairman is at an end. In addition to Hassett, other candidates include Federal Reserve Governor Christopher Waller and former Federal Reserve Governor Kevin Walsh. Previously, Waller's calls for election were high, but since the end of November, Hassett's probability of winning has increased significantly. As of 11:30 Beijing time on Tuesday, data from US forecasting website Polymarket showed that Hassett's chances of winning were 66%, while Waller fell to 4%.
The chairman of the Federal Reserve is nominated by the president and confirmed by the Senate for a four-year term. As is customary, the next chairman should be announced this winter. According to US Treasury Secretary Scott Besant, who is in charge of the selection of the new chairman, Trump is likely to formally announce the nomination results before Christmas.
Last week, Bloomberg, Reuters and other media said that Hassett is deeply trusted by Trump and is a popular candidate to replace Powell. Hassett called reports on a Colombia show on Sunday that he would succeed Powell "rumors," although he noted that the market responded positively to the news that "Trump was about to identify a candidate."
"Americans can expect President Trump to choose someone who can help them get cheaper car loans and easier, lower-interest mortgages. And that's what we see from the market's reaction to rumors about me." Hassett said on the show.
Unlike Powell's relatively hawkish policy stance, Hassett advocates monetary easing to stimulate growth and tends to support tax cuts, fiscal easing, deregulation and low interest rates. He has always said that U.S. interest rates are too high, which could inhibit investment, hiring and household borrowing, and said he would cut rates more aggressively if he took the helm.
Paul Ashworth, chief economist for North America at Capital Investment Macro, told Interface News that Hassett has been engaged in academic research for a long time, worked in pro-Republican think tanks, and served as policy advisor to many moderate Republican presidents and candidates. If Hassett is nominated, it is expected to be quickly confirmed by the Senate.
The 63-year-old Hassett has served at the Federal Reserve, the Hoover Institution, the American Enterprise Institute and other institutions, and has served as John McCain, George Bush, Mitt Romney and other Republican presidents and presidential candidates. Chief economic adviser.In 2017, Hassett joined the Trump administration for the first time as chairman of the President's Council of Economic Advisers. After Trump returned to the White House this year, Hassett once again joined Trump as director of the White House National Economic Council and one of Trump's economic advisers.
Lu Zhe, chief economist of Soochow Securities, told Interface News that Hassett has both academic and think tank background, as well as policy experience in central bank and the White House. As an important member of Trump's economic team, he has repeatedly spoken out for Trump's economic, trade, tax and other policies in the media in the past, and is regarded as a potential central bank chairman who is "government-friendly."
"If Hassett is finally elected chairman of the Federal Reserve, he will be more willing to stimulate the economy through monetary easing and more actively promote interest rate cuts, possibly lowering the benchmark federal funds rate from the current 3.75 - 4% to well below 3%." Lu Zhe said.
Bank of America securities analyst Aditya Bhave also said that if Hassett succeeds Powell, he may try to lower the policy rate sharply below 3%.
However, analysts said that although Hassett is the most politically inclined candidate for the Fed chairman, he would not pose a substantial threat to the Fed's independence.
Bhave called Hassett a "dove seeking credibility." He pointed out in a research paper that Hassett specifically emphasized the importance of the Federal Reserve's independence in a recent interview, which can be seen as a gesture of kindness to members of the Federal Open Market Committee (FOMC).
Lu Zhe also said that compared with other members of Trump's economic policy team, Hassett was relatively cautious.In September, before the Federal Reserve's interest-rate meeting, Trump's nominated Fed governor Stephen Milan advocated a 50 basis point rate cut, while Hassett believed that a 25 basis point rate cut would be more appropriate and said that interest rates should continue to be adjusted steadily based on economic data.
"Taken together, we believe that he will ostensibly comply with Trump's demands, but will not pose a substantial threat to the independence of the Federal Reserve." Ashworth said. He further said that the direction of the Fed's policy depends not only on the economic outlook, but also on whether the new chairman can persuade colleagues to lower interest rates below neutral levels, or convince the market that neutral interest rates have moved downward.
The FOMC is the core decision-making body of the Federal Reserve and is responsible for formulating monetary policies such as determining interest rate levels. The FOMC consists of 12 members, including 7 Fed governors, the New York Fed chairman, and 4 regional Fed chairmen. Among them, the Federal Reserve Board of Governors and the Chairman of the New York Fed are standing voting committees, and the remaining 4 seats rotate among the 11 regional Federal Reserve chairmen except the New York area for a one-year term.
At present, there are obvious differences within the FOMC. In late November, two Federal Reserve governors Milan and Waller, and New York Fed Chairman John Williams made clear their support for interest rate cuts in December. However, according to Kevin Flanagan, head of fixed income strategy at Wisdom Tree, during the week from November 9 to 15, 6 of the 12 regional Fed chairmen publicly stated that inflation was still too high and interest rate cuts should be suspended, and 3 of these 6 have voting rights in this year's FOMC.
"Powell has made few public statements, but the current mainstream view is that the support of key allies such as New York Fed President Williams and San Francisco Fed President Mary Daly for interest rate cuts suggests that Powell may also be inclined to loosen again next month." Ashworth said.
He also pointed out that the futures market is currently pricing the Federal Reserve's interest rate cut by 65 - 70 basis points after January next year,"but we think this expectation is too high." Ashworth said that the future direction of interest rates may depend on two major personnel changes: whether the controversial Federal Reserve Governor Lisa Cook can retain her position in the Supreme Court's ruling on her dismissal or be replaced by another extreme dovish appointed by Trump; and whether Powell will break custom and remain as a Federal Reserve governor after the end of his term as chairman. Powell's term of office will end on January 31, 2028.
In August this year, Trump tried to remove Cook from his position as a Federal Reserve governor on the grounds of suspected mortgage fraud. Cook filed a lawsuit through his lawyer, claiming that there was no legal basis for firing her. On October 1, the U.S. Supreme Court rejected Trump's request to fire Cook during the lawsuit, allowing him to continue to perform his duties until a Supreme Court hearing in January 2026. At present, in addition to participating in court battles to maintain his position, Cook keeps a low profile in public. Overall, she believes the U.S. economy remains solid, but the Fed faces risks on both employment and inflation targets.