As President Donald Trump edges closer to announcing his pick for the next chair of the US Federal Reserve, the world of finance is holding its breath. The decision, expected in early 2026 as Jerome Powell’s term nears its end, has become a lightning rod for debate over the independence of America’s central bank, the future direction of interest rates, and the broader health of the US economy.
Trump’s relationship with the Federal Reserve has been anything but smooth. According to The Conversation, after appointing Jerome Powell as Fed Chair in 2018, Trump quickly soured on his own pick, frequently criticizing Powell for not cutting interest rates fast enough. He even went so far as to call Powell a “clown” with “some real mental problems” and publicly expressed his desire to fire him—a move that legal protections prevent unless corruption or misconduct can be proven.
Unable to remove Powell before his term expires, Trump has sought other ways to influence the Fed. He reportedly tried to have Fed Governor Lisa Cook removed via a Justice Department investigation into mortgage fraud, but the charges were found to be baseless, and Cook remains in her post. This pattern of attempted intervention has intensified scrutiny of Trump’s next move, especially as Americans grapple with a deepening affordability crisis and inflationary pressures that have become central to the political conversation.
Trump has made it clear: his next Fed chair must be willing to “immediately and significantly” cut interest rates and be open to his views on monetary policy. The rationale is simple—lower rates might give the economy a short-term boost, potentially easing voters’ economic anxieties. Yet, as The Conversation points out, history offers a cautionary tale. When President Richard Nixon pressured Arthur Burns, his handpicked Fed chair, to slash rates in the 1970s, the result was stagflation: soaring inflation and unemployment, a scenario that scarred the US economy for years. The eventual cure, known as the “Volcker shock,” required interest rates as high as 19% and triggered deep economic pain before inflation was finally tamed.
Fast-forward to today, and the specter of stagflation looms again, with some economists warning of similar warning signs. Against this backdrop, Trump’s shortlist for Fed chair has narrowed to two familiar faces: Kevin Hassett and Kevin Warsh. The contest between them is now the talk of Wall Street, with every move and statement dissected for clues about the future of US monetary policy.
Kevin Hassett, currently director of the National Economic Council and a close Trump ally, was initially seen as the frontrunner. As Barchart and Bloomberg reported, prediction markets had Hassett’s odds above 80% earlier in December. But that lead has eroded. According to Asia Business Daily, concerns have mounted that Hassett’s close relationship with Trump could undermine the Fed’s independence and make it harder to keep inflation in check. Investors fear that a “dovish” Fed chair—one who is quick to cut rates—could send long-term bond yields higher, the opposite of what Trump wants.
Ken Griffin, CEO of the hedge fund Citadel, captured the mood at a Paris event, telling the Financial Times that Trump should “maintain distance” from the central bank. “The most important step the President and the next Chair can take is to maintain distance between the White House and the Fed,” Griffin said. His comments echoed a growing consensus on Wall Street that the Fed’s political independence is non-negotiable if the US is to manage inflation credibly and reassure global markets.
Hassett, for his part, has tried to address these concerns. In a recent CBS News “Face the Nation” interview, he insisted that Trump would have “no weight” in Federal Open Market Committee rate decisions. “His opinion matters if it’s good, if it’s based on data,” Hassett explained, emphasizing that committee members would vote independently if they disagreed. He reiterated that the Fed’s role requires consensus among governors, not direction from the White House. Still, his willingness to communicate Trump’s economic ideas to the committee, as he told CNBC, has done little to quell skepticism.
Meanwhile, Kevin Warsh, a former Fed governor and bank executive, has quietly gained support. Jamie Dimon, CEO of JPMorgan Chase, recently indicated that Warsh would be a more suitable choice, citing his experience as a bridge between the Fed and Wall Street during the financial crisis. As Asia Business Daily and Barchart note, Warsh’s odds in prediction markets have surged, rising from about 11% to 44% in recent weeks, reflecting growing belief that he could emerge as the compromise candidate.
The uncertainty has already rippled through financial markets. On December 16, 2025, the US dollar index fell to a 2.25-month low, pressured by Fed-friendly economic data and expectations of easier monetary policy ahead. Barchart reported that the dollar’s weakness was exacerbated by market fears that Trump would appoint a dovish Fed chair, which could further undermine the currency. Bond markets, too, are on edge, with the prospect of higher long-term yields if investors doubt the Fed’s resolve to fight inflation.
Inside the White House, the debate appears far from settled. According to sources cited by Asia Business Daily and Barchart, interviews with candidates were canceled and rescheduled in early December, suggesting internal divisions and a keen awareness of market sensitivities. Trump himself has fueled the drama, telling reporters he “certainly should have a role” in discussions with the Fed chair about interest rates—a stance that breaks with decades of presidential restraint and has only heightened concerns about the central bank’s autonomy.
For now, the world waits. The choice between Hassett and Warsh is more than a personnel decision; it’s a test of whether the US will uphold the tradition of central bank independence or pivot toward a more politically influenced model. As The Conversation warns, the lessons of the 1970s are clear: sacrificing long-term stability for short-term political gain can come at a steep price. With the stakes this high, the next Fed chair’s first challenge may be to convince both markets and the public that the US is not about to repeat history.
As the Fed chair race reaches its climax, investors, consumers, and policymakers alike are watching for one answer: will the next leader of the world’s most powerful central bank have the independence—and the courage—to say no when it matters most?
