Who will be the next Fed Chair? Check out these 5 people on Trump's shortlist

Key Concepts

Federal Reserve Chair: The head of the U.S. central bank, responsible for monetary policy.
Monetary Policy: Actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.
Interest Rates: The cost of borrowing money, set by the Federal Reserve to influence economic growth and inflation.
Inflation: A general increase in prices and fall in the purchasing value of money.
Fed Independence: The principle that the Federal Reserve should be free from political influence when making monetary policy decisions.
Sound Money Policies: Economic policies that aim to maintain the value of a currency.
Stagflation: A period of slow economic growth and high unemployment combined with rising prices.
AI and Productivity: The potential for Artificial Intelligence to increase economic output and efficiency.
Tariffs: Taxes imposed on imported goods, which can affect prices and inflation.
Fed Balance Sheet: The total assets and liabilities of the Federal Reserve.
Basel III: An international regulatory framework for banks aimed at strengthening bank capital requirements.
Capital Requirements: The amount of capital banks are required to hold as a percentage of their risk-weighted assets.
Risk Profile: An assessment of the potential risks associated with a particular entity or activity.

Candidates for Federal Reserve Chair

President Trump is expected to name a new Federal Reserve chair to replace Jerome Powell. The short list includes five candidates:

Fed Governors Christopher Waller and Michelle Bowman
Former Fed Governor Kevin Warsh
National Economic Council Director Kevin Hassett
BlackRock Head of Fixed Income Rick Rieder

Kevin Hassett

Kevin Hassett, the current National Economic Council Director, is considered a front-runner.

Relationship with President Trump: Serves as Trump's economic adviser and previously served in his first presidential term.
Key Priorities: Emphasizes Fed independence, sound money policies, and aligning interest rates with economic conditions.
Criticisms of the Fed:
- Believes the Fed made partisan policy decisions.
- Criticized the Fed for assuming pandemic-era inflation spikes were temporary.
- Noted the Fed raised rates after tax cuts during Trump's first term and cut rates before the 2024 presidential election.
Views on Interest Rates: Shares President Trump's view that interest rates should be lower. Believes it would be a mistake for the Fed not to cut rates in December due to the government shutdown's impact on fourth-quarter growth.
Statement: "I think that there's a lot of uh house cleaning needs to happen at the Federal Reserve and I'm confident that anyone the president chooses will get to work and try to fix it and make the Fed independent again."

Kevin Warsh

Kevin Warsh was previously considered the favorite but is now seen within the top three candidates.

Experience:
- Fed Governor from 2006 to 2011, nominated by President George W. Bush.
- Liaison to Wall Street for former Fed Chair Ben Bernanke during the 2008 financial crisis.
- Special Assistant to President Bush for economic policy.
- Executive Secretary at the National Economic Council.
- Experience in M&A at Morgan Stanley.
Education: Holds a degree in public policy (economics and statistics) from Stanford and a law degree from Harvard.
Past Consideration: Trump considered him for Fed chair eight years ago.
Criticisms of the Fed:
- Advocates for the Fed to "disregard its forecast of stagflation," arguing it overlooks AI's potential to boost productivity and lower inflation.
- Criticized Chair Powell for "unwise choices" like missing the persistence of post-pandemic inflation.
Views on Inflation: Rejects the idea that inflation is caused by rapid economic growth or high wages. Argues it stems from excessive government spending and money printing.
Views on Tariffs: Considers tariffs as one-off price increases, a view shared by the White House and many Fed members.
Economic Outlook: Believes the Fed's policies are hindering the economy, that the U.S. is in a housing recession, and that interest rates and the Fed's balance sheet should be smaller.

Christopher Waller

Governor Chris Waller is already a member of the Federal Reserve Board of Governors.

Alignment with Trump's Views: His views are in line with President Trump's.
Early Advocate for Rate Cuts: Was the first central banker to call for rate cuts in July after the Fed's June meeting.
Appointment: Appointed by President Trump in 2020.
Background:
- Director of Research at the St. Louis Fed (2009-2020).
- Professor and Chair of Economics at the University of Notre Dame.
- Research Fellow at Notre Dame's Kellogg Institute of International Studies.
- Professor and Chair of Macroeconomics/Monetary Economics at the University of Kentucky.
Education: BS in Economics from Bucknell State University and a PhD from Washington State University.
Views on Interest Rates: Supports cutting interest rates in December due to concerns about a weakening job market over accelerating inflation.
Views on Labor Market: Believes lower payroll growth is due to weaker demand for workers and lower immigration. Considers weaker demand the primary issue.
Views on Inflation: States that data through September showed small effects from tariffs, supporting his hypothesis that they are a one-off price increase, not a persistent source of inflation. Believes inflation, excluding tariffs, is close to the Fed's 2% goal.
Future Policy: After December, he advocates for a meeting-by-meeting approach to rate cuts, which is more cautious than President Trump's desire for significantly lower rates.

Michelle Bowman

Michelle Bowman is a member of the Federal Reserve Board of Governors and was appointed Vice Chair of Supervision earlier this year.

Views on Interest Rates: Shares President Trump's view that interest rates should be lower, citing fragility in the job market.
Rate Cut Projections: Has penciled in three rate cuts for the current year and is expected to vote for a rate cut next week.
Views on Inflation: Sees limited pass-through from tariffs, expecting only a small, short-lived effect. Believes inflation, excluding tariffs, is within the Fed's 2% goal.
Fed Tenure: Member of the Federal Reserve since 2018, initially filling an unexpired term and reappointed for a full term ending in 2034.
Previous Roles:
- Kansas State Bank Commissioner.
- Vice President of Farmers & Drovers Bank in Kansas.
- Policy adviser to President George W. Bush's Homeland Security Secretary.
- Director of Congressional and Intergovernmental Affairs at FEMA.
Education: Bachelor's degree from the University of Kansas and a law degree from Washburn University School of Law.
Alignment with Administration: Her views align with other Trump-appointed financial regulators and the administration.
Opposition to Basel III: Strongly opposed former Vice Chair of Supervision Michael Barr's plan to significantly increase capital requirements on banks (up to 20%), arguing it would harm the economy. She expects this proposal to be rolled back and a new one issued early next year, more in line with the 2017 Basel plan.
Regulatory Approach: Advocates for regulations tailored to banks based on their risk profile and size.
Fed Independence: Considers Federal Reserve Bank independence critical for monetary policy decisions but also emphasizes transparency and accountability.

Rick Rieder

Rick Rieder heads up fixed income for BlackRock, overseeing $2.4 trillion in assets.

Experience:
- Served as Vice Chairman of the Treasury Borrowing Committee.
- Member of the Fed's Investment Advisory Committee on Financial Markets.
- Spent a significant portion of his career at Lehman Brothers, overseeing its global proprietary investment platform and heading its credit business.
Education: Degree in Finance from Emory and an MBA from Wharton.
Views on Interest Rates: Believes the Fed can and should cut rates next week.
Views on Inflation and Labor: Acknowledges inflation is above the 2% goal but has a "stronger view that I think labor is a tricky thing from here, and I think there is significant displacement on labor that we're going to see over the next couple of years."
Job Growth: Believes job growth, excluding healthcare, has been negative in recent spring and summer months, a trend he expects to persist.
Economic Outlook: Hopes the economy remains resilient, believes it is currently in good shape, and companies are in great shape, but notes that labor is "a bit weak."

Announcement Timeline and Presidential Intent

President Trump stated he "knows who he wants to pick" as the next Fed chair and expects an announcement "early next year."
This pushes back the previously anticipated announcement by Christmas, as indicated by Treasury Secretary Steven Mnuchin.
Media reports and market indicators (like Polymarket) suggest Kevin Hassett is the front-runner.
Treasury Secretary Mnuchin, when interviewed, demurred on confirming Hassett, emphasizing the committee's role in setting interest rates and critiquing regional Fed officers for not being from the regions they serve.

Synthesis and Conclusion

The potential candidates for the next Federal Reserve Chair exhibit a range of experiences and perspectives, but a common thread among them, particularly those favored by President Trump, is a desire for lower interest rates and a critical view of the Federal Reserve's recent policy decisions. Kevin Hassett, as a close economic advisor to the President, is positioned as a leading candidate, emphasizing Fed independence and sound money while also aligning with Trump's views on lower rates. Kevin Warsh brings extensive central banking and Wall Street experience, advocating for a reevaluation of inflation drivers and a more aggressive stance on rate cuts. Christopher Waller, already on the Fed board, is seen as a strong contender due to his alignment with the President's views and his early calls for rate reductions, prioritizing the job market over inflation concerns. Michelle Bowman, another Fed Governor, shares the President's sentiment on lower rates and has a history of opposing stringent bank regulations, aligning with the administration's approach. Rick Rieder, from BlackRock, offers a perspective from the financial markets, also advocating for rate cuts and expressing concerns about the labor market. The eventual nominee will likely face scrutiny regarding their commitment to Fed independence, their approach to inflation, and their alignment with the President's economic agenda. The timing of the announcement has been shifted to early next year, leaving some uncertainty despite the President's stated certainty.