Trump Sets Rate Cuts as Litmus Test for Fed Chair

President Donald Trump is selecting a successor to Federal Reserve Chair Jerome Powell, whose term ends in May 2026. Trump has stated that a willingness to implement immediate interest rate cuts serves as a "litmus test" for the position, while criticizing Powell as "a combination of not a smart person and doesn’t like Trump."

National Economic Council Director Kevin Hassett has emerged as the front-runner for the nomination. Hassett has publicly advocated for further rate cuts, suggesting that artificial intelligence could drive growth and allow for lower borrowing costs without overheating the economy. However, financial markets and bond investors have expressed concern that appointing a loyalist could compromise the Federal Reserve's political independence and trigger a sell-off of U.S. assets.

Other finalists for the role include Federal Reserve Governors Christopher Waller and Michelle Bowman, former Governor Kevin Warsh, and BlackRock's Rick Rieder. Trump and Treasury Secretary Scott Bessent are conducting interviews with these candidates, though White House spokesperson Kush Desai has dismissed current reports as "pointless speculation." Trump indicated he has a "pretty good idea" of his choice but may delay the official announcement until early 2026.

These leadership tensions coincide with a December Federal Open Market Committee meeting to decide on a third interest-rate cut for the year. The decision is complicated by a lack of economic data following a six-week government shutdown. Simultaneously, Trump is pursuing other economic shifts, including distributing $12 billion in tariff revenues to farmers and attempting to remove Fed Governor Lisa Cook over allegations of mortgage fraud, a move currently under Supreme Court review.