Who will President Trump pick as the next Fed Chair?

Last week I had the pleasure of speaking with former Federal Reserve Vice Chair – Richard Clarida – who served at the Fed between 2018 and 2022, working with Jerome Powell. He shared his perspective on the potential candidates to succeed Jerome Powell as Chair of the Federal Reserve next year, highlighting three individuals.

Although many candidates are possible, and we might see other names appear over the next six months. This article covers the policy orientations and political alignments of these candidates, and what it might mean for interest rate policy.

Introducing three possible names to be the next Fed Chair

The question of who will lead the Federal Reserve into the next era of monetary policy is becoming increasingly important. With current Chair Jerome Powell’s term set to expire in Spring 2026, speculation has intensified around his replacement.

Three possible replacements, noted by Richard Clarida are – Kevin Warsh, Kevin Hassett, and Scott Bessent. Each of them bring a distinct blend of experience, ideology, and differing level of alignment with President Trump – who is widely expected to play a decisive role in the selection.

1. Kevin Warsh

Mr Warsh is a former Fed Governor and Wall Street veteran, known for his hawkish stance and institutional credibility. He is a former Federal Reserve Governor (2006–2011) and previously worked at Morgan Stanley and served in the George W. Bush administration. He is currently known for his hawkish stance on inflation and scepticism of unconventional monetary policy tools like quantitative easing. Warsh has deep institutional knowledge of the Fed and is respected by financial markets being previously vetted for top economic roles. While a strong contender, he may be perceived as too independent or orthodox for a Trump-led administration seeking aggressive rate cuts.

2. Kevin Hassett

Mr Hasset is an economist and former Chair of the Council of Economic Advisers who offers a blend of academic knowledge and political experience and is currently Director of the National Economic Council. He is a conservative economist with a focus on tax policy and growth, generally supportive of pro-business, pro-growth monetary policy. Hassett also has strong academic and policy credentials and is currently a trusted Trump adviser capable of bridging political and economic priorities. Past defence of Fed independence could be politically problematic, and he lacks direct central banking experience.

3. Scott Bessent

Mr Bessent is the current Treasury Secretary and a former hedge fund executive, representing a more unconventional but increasingly influential contender – who is closely aligned with Trump’s economic vision. He is also the former CIO at Soros Fund Management and founder of Key Square Capital. His views are strongly dovish, favouring low interest rates and looser monetary policy to stimulate growth. Bessent is a Trump ally with deep financial market experience, and is likely to support a more politically aligned Fed. While credible with financial markets, he has no central banking experience and has concerns about politicisation of the Fed and erosion of its independence.

Overall, Warsh stands out for his institutional experience and credibility within the Federal Reserve system. His hawkish views on inflation and preference for a rules-based monetary framework align with traditional Fed goals, but may conflict with the Trump administration’s desire for aggressive rate cuts. Warsh’s perceived independence could be both a strength and a liability, depending on the political climate in 2026. Overall, he is a strong contender and was previously considered by Trump in 2017 as someone aligns with Trump’s preference for lower rates and smaller Fed balance sheet.

Hassett offers a middle ground. His academic background and policy experience make him a credible candidate, while his close ties to Trump and pragmatic approach to economic policy suggest he could adapt to political pressures. However, his past defence of Fed independence, and criticism of the attempt to fire Powell might raise concerns among those seeking a more compliant central bank.

Bessent is a current rising star, by contrast to the others, and represents a departure from conventional Fed leadership. With no central banking experience but strong market credentials and loyalty to Trump, Bessent is likely to support a dovish, growth-oriented monetary policy. His nomination would signal a shift toward a more politically aligned Federal Reserve, potentially at the expense of its perceived independence.

Candidate summary

Trump will play a pivotal role in who gets chosen

Trump has been vocal in demanding the Federal Reserve to lower interest rates, arguing they are too high and are stifling growth. He has openly criticised Fed Chair Powell (who he originally nominated in 2017) and is blaming him for potential long-term economic harm. His push for rate cuts has also created visible divisions within the Fed, especially among officials he appointed. Some governors, like Christopher Waller and Michelle Bowman, have publicly supported rate cuts as early as July, diverging from Powell’s more patient stance.

Trump’s public remarks against current Fed policy have marked a departure from traditional presidential respect to the Fed’s autonomy. In this context, the nomination of the next Fed Chair can probably be evaluated by their perceived loyalty to political leadership and their willingness to align monetary policy with political priorities.

The nominated party must already be, or become, a member of the Board of Governors and must be confirmed by the Senate. This is likely where we see Fed independence being defended by the Senate, with the candidate being cross examined in depth on this.

The Chair will serve a four-year term but can remain a Board member for up to 14 years unless reappointed or choosing to resign. Powell’s chairmanship ends in May 2026, but his Board term runs until January 2028. If he chooses not to step down, Trump cannot replace him as a governor at the Fed until then.

There are limited vacancies at the Fed, and Trump may only get to nominate two new governors during his current term, limiting his ability to reshape the Feds overall makeup of doves and hawks. Along with this, the Fed Chair still only gets one vote, so markets will have to work out how much influence the new chair will have on shaping the opinions of other voters.

Independence should be safe, and rates won’t be controlled by Trump

Although it’s only one vote, the Fed Chair sets the meeting agenda, determines the topics of discussion, and frames the policy options. This shapes the direction and focus of the debate, and while each member has one vote, the Chair’s views will carry weight. As well as this, the Chair is the public face of the Fed via their post-meeting press conferences, speeches, and testimonies to Congress. These do heavily influence market expectations and economic sentiment with their stance sometimes signalling longer term policy direction, and as someone who oversees the Board of Governors staff, they can guide the research and analysis that informs FOMC decisions. So, while the Chair doesn’t have unilateral power, their role can shape both the process and outcome of monetary policy decisions.

We aren’t hugely concerned over the change in Fed Chair. They will remain just one of twelve voting members, and we think it is unlikely that a candidate who openly wishes to lower Fed independence will get past the Senate. Overall, actual interest rate decisions will remain controlled by the wider voting members, and hard data on the Feds dual mandate of full employment and stable prices should stay as the driving forces towards changing interest rates. This should allow markets to remained focused economics not politics for forecasting short term US interest rates.