Next Fed chair faces ‘no-win’ test as White House pushes rate cuts

Let’s hope we’ll be spared a swimsuit competition in the beauty pageant that President Donald Trump has conjured up in his search for the next Federal Reserve chair.

The winner will be crowned very soon, according to the president.

As of Dec. 18, there are three top finalists. 

All of them say they pledge allegiance to the independence of the central bank which is a major concern for economists and global markets.

And there’s general agreement among them for a less restrictive monetary policy and lower interest rates which is a major concern of the president.

But then again, the Fed chair is only one of 12 votes on the policymaking Federal Open Market Committee (FOMC). 

The divided FOMC is headed into 2026 with a historic streak of dissents as tensions rose within its dual mandate: a cooling labor market and sticky inflation.

So the president’s stated goal of interest rates at 1% or lower — currently 3.50% to 3.75% — could be out of the purview of the new chair who will take over when Jerome Powell’s term ends in May.

Trump sends strong message on his requirements

The president has also made it very clear that he wants the next chair to listen to his views on the economy and then execute his agenda not only on monetary policy but on the Fed’s $6.7 trillion balance sheet and deregulation of the banking industry.

Fed reform has long been a mantra of Treasury Secretary Scott Bessent who has used his position to preach this cause to investors and businesses.

In short, the next chair inherits a slightly hot mess.

“Anyone who gets the job is damaged goods,” Andy Laperriere, head of U.S. policy research for Piper Sandler, told The New York Times.

“You’re either going to be the guy who succeeds in getting what the president wants, which will not bode well for your treatment in the history books,” Laperriere said, “or you’re going to be the guy who doesn’t get what the president wants, and he’s going to probably turn on you.”

(Trump has lambasted Powell, whom the president appointed as chair in his first term, personally and professionally for most of 2026 for not lowering interest rates.)

Meet the final fed candidates

Trump told The Wall Street Journal Dec. 12 that he was leaning toward choosing either former Fed governor Kevin Warsh or National Economic Council Director Kevin Hassett.

The president also interviewed current Fed Governor Christopher Waller on Dec. 17. 

Reuters reported Dec. 18 that:

• Warsh enjoys close connections to Trump’s circle. 
•  Hassett is a tested Trump booster. 
•  Waller is already steering the Fed towards lower rates and a more conservative approach to its broader activities.

BlackRock Chief Investment Officer Rick Rieder would be interviewed before the end of the year. CNBC reported Dec. 19. 

CNBC, citing White House sources, also reported that Fed Vice Chair Michelle Bowman was no longer a candidate.

Nominee faces a ‘no-win’ job

Jamie Dimon, the chief executive of JPMorgan Chase, said at a private event earlier in December that Warsh would make a “great” chair, even as he added that he respected both Kevins.

“It’s really a no-win scenario for those involved.” said Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, told The New York Times.

Related: After Rate Cut, Fed Chair Jerome Powell Credits Automation and AI For Contributing to This “Structural” Boom in the U.S. Economy

“Either you get worries about credibility, or you get somebody who’s more credible and less loyal,” Goldberg said.

Kalshi reported Dec. 19 that Hassett had a 53% chance of being Trump’s final pick followed by Warsh at 22% and Waller at 14%.

Hassett, 63, has a PhD in economics 

Hassett has remained closely aligned with Trump since serving as head of the White House Council of Economic Advisers during Trump 1.0

He then went on to serve as an adviser to Jared Kushner’s Affinity Partners.

Trump chose Hassett to lead the National Economic Council earlier this year.

Of all the candidates, Hassett is the most bullish on administration policies, arguing there is ample room for more interest-rate cuts due to strong productivity and capital growth.

He has been a vocal critic of the Fed’s culture, scope and leadership throughout 2025.

Waller, 66, has a PhD in economics

Trump appointed Waller to the Fed Board of Governors in 2020. 

Waller has leveraged his academic expertise to shape monetary policy debates with theory and data.

Waller supported the 2022 rapid rate hikes to combat post-pandemic inflation. 

He has been advocating for rate cuts since the middle of the year to support the weakening labor market.

Investors favor Waller but his prospects to be the next Fed chair are likely limited by commitment to independence and lack of a close relationship with Trump unlike Hassett and Warsh.

Waller says current interest-rates remain above the neutral rate, the balance sheet is appropriately sized and rejects claims that the Fed is partisan. 

Waller had a “strong interview” for the central bank chair position with Trump in which the two discussed the labor market in depth and how to jump-start job creation, according to senior administration officials and first reported by CNBC on Dec. 19.

Warsh, 55, is a lawyer and GOP veteran

Warsh served as a former Fed governor from 2006 to 2011, and was once praised by then-Chair Ben Beranke for his deep ties to Wall Street. 

But Warsh resigned from the Fed in opposition to Beranke’s bond-buying programs.

Since then, he has been a vocal critic of the central bank calling for a “regime change.”

Warsh argues that rates can be cut sharply to spur investment and housing affordability. 

He has said that the Fed’s large balance sheet signals institutional overreach.

Warsh is a critic of the Fed’s culture, saying it strayed into politically charged areas like climate change that are beyond its mandate.

Related: Fed cut backfires as mortgage rates climb and demand slumps