Trump's Hassett Comments Boost Warsh's Fed Chair Prospects

On January 16, 2026, President Donald Trump delivered remarks at the White House that fundamentally altered the competitive landscape for the next Federal Reserve chair nomination. When addressing National Economic Council Director Kevin Hassett in front of reporters, Trump stated: “I actually want to keep you where you are, if you want to know the truth” [1][2]. This explicit expression of preference for maintaining Hassett in his current role effectively ruled him out of the Fed chair competition, triggering an immediate and significant shift in prediction market assessments.

The shortlist for the Fed chair position has narrowed considerably following this development. According to market intelligence and multiple verified financial news sources, the current field consists of Kevin Warsh, a former Federal Reserve Governor from 2006 to 2011; Christopher Waller, who currently serves on the Fed’s Board of Governors; Rick Rieder, Chief Investment Officer of BlackRock’s fixed income business; and Michelle Bowman, an existing Fed Governor [1][2]. Prior to Trump’s comments, Warsh and Hassett were essentially tied in prediction market assessments, with both commanding approximately 40% probability of selection.

The immediate market reaction to this political development was notably subdued, indicating that market participants had already priced in considerable uncertainty regarding the Fed leadership transition. Major U.S. equity indices demonstrated minimal movement: the S&P 500 declined by 0.06%, the NASDAQ Composite fell by 0.28%, the Dow Jones Industrial Average slipped by 0.04%, while the Russell 2000 actually gained 0.45% [0]. This muted response suggests investors perceive the potential Warsh appointment as consistent with baseline expectations rather than a dramatic departure from anticipated outcomes.

The Treasury market displayed greater sensitivity to the development, with the 10-year yield rising approximately 4 basis points following the announcement. This reaction aligns with market expectations that Warsh, if appointed, might advocate for a more hawkish monetary policy stance compared to the current administration [0]. The bond market’s response indicates heightened attention to potential policy implications rather than immediate portfolio repositioning.

The emergence of Kevin Warsh as the clear frontrunner carries significant implications for monetary policy direction that warrant careful monitoring. Warsh has been publicly critical of the Federal Reserve’s handling of inflation during the current cycle and has advocated for what he terms “regime change” at the central bank [1]. His background at Morgan Stanley, where he served as president before returning to public service, positions him as a candidate with deep ties to Wall Street—an attribute that could intensify ongoing debates about central bank independence. The Warsh appointment, if confirmed, could signal a potential shift toward more aggressive interest rate policies and stricter regulatory approaches.

Christopher Waller’s position has strengthened as a secondary beneficiary of Hassett’s elimination from consideration, with his prediction market probability rising to approximately 18% [2]. Waller’s status as a current Fed Governor provides him with institutional credibility and existing relationships within the central banking apparatus, potentially facilitating a smoother transition if nominated. His policy positions have generally been viewed as aligned with maintaining the Fed’s current strategic framework, making him an attractive option for stakeholders who prefer policy continuity.

The timing of this development is particularly significant given the broader context of the Fed leadership transition. Jerome Powell’s term as Fed Chair expires in May 2026, and Trump has indicated he will announce his selection “over the next couple of weeks” [1]. The Justice Department investigation related to Fed headquarters renovation costs, while not directly implicating Powell in any wrongdoing, has added an unusual element of complexity to the transition process. Trump has publicly stated he has “no immediate plans to fire Powell” [3], suggesting the current chair may remain in some capacity even under new leadership.

The prediction market dynamics surrounding this selection process have demonstrated remarkable responsiveness to political signals, with odds shifting dramatically based on relatively brief public statements. The Kalshi and Polymarket platforms, which have gained credibility as political and economic forecasting tools, showed Warsh’s probability increasing by approximately 19 percentage points immediately following Trump’s remarks [2]. This sensitivity highlights the importance of monitoring non-traditional information sources during high-stakes political selection processes.

The analysis identifies several risk considerations that warrant attention from market participants and policy observers. First, Warsh’s potential appointment could introduce greater volatility into monetary policy decision-making, as his advocacy for “regime change” suggests a willingness to depart from established frameworks [1]. This departure could create uncertainty during a period when markets have been seeking stability following the post-pandemic economic adjustment period.

Second, the confirmation process in the Senate Banking Committee presents inherent uncertainty regardless of prediction market assessments. Even with favorable odds, Warsh would need to navigate a confirmation process that could surface previously undisclosed concerns or policy disagreements. Market participants should anticipate potential volatility around key confirmation milestones, including committee hearings and floor votes.

Third, the broader debate about Federal Reserve independence could intensify significantly with a Warsh appointment. His close association with Wall Street and his history of public criticism of Fed policy decisions may raise questions among congressional members about the appropriate balance between White House influence and central bank autonomy. This debate could manifest in legislative proposals or oversight hearings that introduce additional uncertainty.

The current environment presents opportunities for proactive risk assessment and portfolio positioning. Market participants with interest-rate-sensitive portfolios may benefit from reviewing duration exposure in light of the potential for a more hawkish Fed leadership configuration. The Treasury market’s initial response suggests bond investors are already incorporating this possibility into pricing, but further assessment may be warranted as confirmation prospects evolve.

Monitoring confirmation hearing timelines and any additional Trump statements regarding Fed leadership will provide important signals for updating probability assessments. The period between now and the expected announcement represents a window for incorporating new information into existing frameworks before market pricing fully reflects the ultimate selection outcome.

This analysis is based on the MarketWatch report [source: MarketWatch, January 16, 2026] regarding President Trump’s comments on Kevin Hassett’s role, supplemented by market data [0] and corroborating reports from CNBC [1], Business Insider [2], and Global News [3]. The key findings indicate that Kevin Warsh has emerged as the leading candidate for Federal Reserve chair, with prediction market odds indicating approximately 59% probability of selection. Kevin Hassett’s probability has declined to approximately 14%, effectively eliminating him from contention based on Trump’s explicit preference to retain him in his current White House position. Christopher Waller maintains secondary positioning at approximately 18% probability.

The Fed chair announcement is expected within the coming weeks, with Powell’s term set to conclude in May 2026. Market reaction has been muted, suggesting limited surprise element in the development. Treasury markets have displayed greater sensitivity, with yields adjusting upward in anticipation of potentially more hawkish monetary policy under Warsh’s leadership.