Trump Announces Final Selection for Next Federal Reserve Chair: Market and Policy Implications

On December 1, 2025, President Donald Trump announced his finalized nominee for the next Federal Reserve (Fed) Chair aboard Air Force One [0], concluding months of speculation as current Chair Jerome Powell’s term ends in May 2026 [5]. Trump’s announcement follows over 40 public criticisms of Powell since April 2025 for slow interest rate cuts, highlighting the administration’s priority for a chair aligned with aggressive monetary easing [2].

The leading candidates include Kevin Hassett (53% Polymarket odds), Christopher Waller (22%), and Kevin Warsh (16%), with Michelle Bowman and Rick Rieder also on the shortlist [1][2][3]. Hassett, a close economic advisor, has criticized Powell’s policy and called for rate cuts despite recent job growth, making him the most aligned with Trump’s goals but raising concerns about potential erosion of Fed independence [1][2][5]. Waller, a current Fed governor, was the first central bank official to advocate for rate cuts in July 2025 and represents institutional continuity [3][4]. Warsh, known for hawkish leanings during his prior Fed tenure, is a less likely choice given Trump’s focus on easing [2].

Market reaction was mixed: 10-year Treasury yields dipped below 4% as Hassett’s nomination odds rose [2], but the U.S. dollar and Fed funds futures showed minimal movement because markets had already priced an 83% probability of a quarter-point December rate cut [1].

1. Policy Alignment vs. Institutional Independence
   : The frontrunners highlight a tension between Trump’s desire for direct policy alignment (Hassett) and maintaining Fed institutional continuity (Waller), with significant implications for market perceptions of central bank independence [1].
2. Pre-Priced Market Expectations
   : The limited immediate market reaction underscores that short-term rate cut expectations are already fully priced in, meaning the nominee’s longer-term policy stance will be the primary driver of future market moves [1].
3. Nomination Process Dynamics
   : Treasury Secretary Scott Bessent, leading the selection process, has ruled himself out as a candidate, focusing market attention on the identified frontrunners [2].

• Risks
  : A Hassett nomination could pressure the U.S. dollar and steepen the Treasury yield curve due to concerns about reduced Fed independence [1]. Uncertainty surrounding Senate confirmation (required for both the chair role and a 14-year Fed governor term for external candidates) may introduce short-term market volatility [5].
• Opportunities
  : Clarity on the nominee’s identity will reduce policy uncertainty, and a well-received candidate could stabilize long-term market expectations. If the nominee balances easing goals with inflation concerns, it may support sustainable economic growth [1].

• President Trump announced his Fed Chair selection on December 1, 2025 [0].
• Jerome Powell’s term as Fed Chair expires in May 2026 [5].
• Frontrunners (Polymarket odds): Kevin Hassett (53%), Christopher Waller (22%), Kevin Warsh (16%) [1].
• Markets have priced an 83% probability of a quarter-point rate cut in December [1].
• Hassett’s nomination raises concerns about Fed independence; Waller offers institutional continuity [1][3].