The Federal Reserve, long considered a bastion of independence in the American economic system, now finds itself at a critical crossroads. With Jerome Powell’s term as chair set to expire on May 15, 2026, President Donald Trump’s search for a successor is drawing intense scrutiny from Wall Street, policymakers, and the broader public. The stakes could hardly be higher: the next Fed chair will inherit a sharply divided central bank, a fragile economy, and a political environment that’s anything but forgiving.
On December 10, 2025, the Federal Reserve announced a 25 basis point cut in interest rates, lowering its target range to 3.5%-3.75%. This marked the third rate cut of the year, a decision that was anything but unanimous. According to CNN, three members of the Fed’s rate-setting committee dissented—a level of division not seen since 2019. The split reflects the central bank’s ongoing struggle to balance two competing threats: stubbornly high inflation and a labor market that’s showing signs of weakness.
Chicago Fed chief Austan Goolsbee summed up the tension, stating, “I felt the more prudent course would have been to wait for more information.” Yet, he remains “one of the most optimistic folks about how rates could go down in the coming year,” as reported by Stocktwits. On the other side, Kansas City Fed chief Jeffrey Schmid argued for a more restrictive stance, warning, “Inflation remains too high, the economy shows continued momentum, and the labor market, though cooling, remains largely in balance.” Cleveland Fed President Beth Hammack echoed concerns about inflation, while Philadelphia Fed President Anna Paulson, who will vote next year, is more worried about the weakening labor market despite the recent cuts.
This divergence is more than just academic. Investors, always attuned to the Fed’s every move, have responded with caution. The price of Bitcoin, for instance, remained nearly flat around $90,000 following the Fed’s decision, and the Fear and Greed Index stayed firmly in ‘fear’ territory, as noted by Stocktwits. Even the broader stock market showed mixed signals: retail sentiment appeared ‘bullish’ for the SPDR S&P 500 ETF and the Dow Jones Industrial Average ETF, but ‘bearish’ for the Invesco QQQ Trust, reflecting the uncertainty that’s gripping financial markets.
Amid this backdrop, all eyes are on President Trump’s search for the next Fed chair. In recent interviews—including one with The Wall Street Journal—Trump has made it clear he’s weighing two leading candidates: Kevin Warsh, a former Fed governor and Wall Street executive, and Kevin Hassett, the current director of the National Economic Council and former chair of the White House Council of Economic Advisers. “You have Kevin and Kevin,” Trump quipped, adding that both were “great” options. He’s also made no secret of his desire for a Fed chair who supports lower interest rates, telling Politico that a willingness to cut rates is essentially a “litmus test.”
Trump’s preference is rooted in both ideology and political calculation. He has repeatedly expressed regret over his prior selection of Jerome Powell, who was first nominated during Trump’s own presidency but renominated by President Joe Biden. Trump has argued that the next Fed chair should consult with the president on rate decisions, claiming that such coordination was more common in the past. He’s also called for interest rates to be around 1% or lower within a year, citing the need to reduce the cost of servicing the nation’s ballooning $30 trillion debt.
Kevin Hassett, often considered the frontrunner, is a conservative economist with deep ties to Trump’s administration. As CNN reports, prediction markets give him a 70% chance of being the pick. Hassett has advocated for even deeper cuts, calling for a half-point reduction this week. Yet, he’s played down speculation about his status, noting that Trump is known for changing his mind at the last minute.
Kevin Warsh, meanwhile, brings a different pedigree. He served as a Fed governor from 2006 to 2011, advised President George W. Bush, and was previously interviewed by Trump for the chair role in 2017. According to The Wall Street Journal, Warsh met with Trump for about 45 minutes recently, during which the president pressed him on his willingness to support rate cuts. Warsh reportedly signaled his support for lowering rates, aligning with the president’s preferences.
The decision, however, is far from settled. Treasury Secretary Scott Bessent has also interviewed other contenders, including current Fed governors Christopher Waller and Michelle Bowman, both appointed during Trump’s first term. The final round of interviews is underway, and Trump’s timeline for announcing a nominee has shifted repeatedly. While he has indicated a decision could come early in 2026, observers caution that the timing could slip again.
Whoever takes the helm will face a deeply divided institution. The Fed’s consensus-driven culture means that even the chair gets just one vote on the 12-member rate-setting committee. As CNN’s Matt Egan put it, “The Fed chair has enormous power. It’s arguably one of the most powerful positions on the planet. Their words alone can move trillions of dollars in financial markets and when there’s an economic emergency, the world turns to the Fed chair for help. And yet the Fed chair’s power is somewhat limited by the fact that the US central bank is a famously consensus-driven institution.”
Wall Street, for its part, is watching closely. While short-term traders may welcome a dovish chair who favors ultra-low rates, investors in the medium and long term crave stability and credibility. The real risk, as Egan notes, is that Trump could pick someone whom the bond market doesn’t trust to fight inflation, potentially driving up long-term interest rates and increasing the cost of borrowing for everyone from homeowners to businesses.
There’s also the question of continuity. Historically, the Fed chair has often been renominated by presidents of both parties, reinforcing the institution’s nonpartisan credibility. Powell himself was first nominated by Trump and then renominated by Biden. Whether that tradition continues—or is upended by the current political climate—remains to be seen. Powell, for his part, has not said whether he will remain on the Fed Board after his term as chair expires; his term as a governor runs until January 2028.
The coming months promise high drama, with the future direction of U.S. monetary policy—and perhaps the very independence of the Federal Reserve—hanging in the balance. As the interviews conclude and speculation swirls, investors, policymakers, and ordinary Americans alike are left waiting for the answer to a question with consequences far beyond Washington: Who will steer the world’s most powerful central bank through these turbulent times?
