President Donald Trump understands who he intends to appoint as the next Federal Reserve chair, but he is not disclosing it at this time. Prediction markets have already made their bets, yet the leading candidate remains noncommittal.
While clarity on that mystery seems imminent in the upcoming weeks, what remains ambiguous is the nature of the environment the new central bank leader will encounter at a pivotal point for the U.S. economy.
Director of the National Economic Council Kevin Hassett has emerged as the undeniable favorite, thanks to a Bloomberg News article last week that assessed the five-person competition to replace current Chair Jerome Powell, whose term concludes in May.
When asked about the situation on Sunday, Trump informed reporters aboard Air Force One, “I know who I’m going to select, yes. We’ll make an announcement.” Furthermore, he grinned when questioned about Hassett, stating, “I’m not revealing it, we’ll announce it.”
The candidate himself participated in weekend talk shows, sidestepping inquiries regarding his chances. Hassett is part of a group that also consists of current Governors Christopher Waller and Michelle Bowman, former Governor Kevin Warsh, and BlackRock fixed income leader Rick Rieder.
“I’m truly honored to be included among such an impressive group of candidates,” Hassett stated Sunday on CBS’ “Face the Nation.” He did point out that the markets had responded positively to news of him being the favorite, mentioning that Americans “could expect President Trump to select someone who will assist them in obtaining cheaper car loans and easier access to mortgages at lower rates.”
Shortly prior, on Fox News, Hassett simply remarked, “If he chooses me, I’d be pleased to serve.”
Prediction markets have been bustling in recent days, assigning strong probabilities to Hassett securing the position. As of Monday afternoon, Kalshi traders estimated a 79% probability, while PredictIt assessed the likelihood at 75%, and Polymarket placed it at just 63%, with “no announcement by Christmas” having the second-highest likelihood of 22%, significantly surpassing any of the other four contenders.
A divided Fed
Whomever is ultimately chosen will take charge of a Fed that is currently split between officials advocating for additional interest rate cuts to mitigate potential labor market issues versus those concerned that inflation remains a threat that could worsen with further monetary policy easing.
For the upcoming rate decision on Dec. 10, futures market traders project an 87.6% chance of a rate cut amidst highly fluctuating trading in recent weeks.
Trump and other administration representatives have expressed strong preferences for significantly lower rates, with the president indicating that this preference will be a determining factor for the next chair. In 2026, the rotating group of regional presidents voting on the Federal Open Market Committee will likely have a hawkish inclination, indicating a preference for combating inflation and maintaining stable rates.
However, the forthcoming Fed leadership will encompass more than just rate considerations.
In a recent CNBC interview, Treasury Secretary Scott Bessent, who is overseeing the Fed chair search, mentioned he advocates for a reevaluation of the Fed’s mission.
“We have reached a point where monetary policy has become very complex, and it’s more than merely cutting rates,” he stated. “I believe we need to simplify things.”
Call for reform
Specifically, Bessent highlighted the role of the regional presidents.
Although they have a relatively minor role — at least in comparison to the chair and the Board of Governors — in determining rates and other monetary policy issues, public remarks from local leaders can sometimes influence markets.
Bessent asserted that this relates to broader questions regarding the increasingly prominent role the Fed has assumed in the economy and financial markets, largely since the financial crisis when the central bank played a crucial role in implementing measures to steer the economy away from its most severe downturn since the Great Depression.
“I think it’s time for the Fed to retreat into the background as it once did, stabilize things, and serve the American people by establishing sound monetary policy,” he stated. “All these speeches by these bank presidents … are merely redundant. Why don’t they come forward and discuss the significant issues faced by the American populace, instead of merely focusing on the immediate concerns of the next meeting?”
The outlook on regional presidents is crucial given that they will be up for reappointment in 2026. While local boards appoint the presidents, they require the Board of Governors’ consent. One issue Bessent also noted is that several presidents do not originate from the districts they represent.
Mohamed El-Erian, the chief economic advisor at Allianz, endorsed Bessent’s perspective.
“We don’t need a detailed account of every Fed action,” El-Erian remarked Monday morning on CNBC. “We require the Fed to ease its stance. We need the Fed to take a step back and adopt a broader, more visionary perspective. And we need reforms. We urgently need reforms. I believe all five candidates on the shortlist are dedicated to reforming that institution, which is vital not only for the U.S. but for the global economy.”
Correction: The Federal Reserve’s next policy meeting is Dec. 9-10, with a rate decision announced on the second day. An earlier version of this article misrepresented the date.
