While Kevin Hassett's name has emerged as a leading candidate for the Fed chairmanship, it has been alleged that his nomination has faced objections from high-ranking officials close to President Donald Trump. According to sources familiar with the matter, Hassett's candidacy, once considered almost certain by the markets, has come under scrutiny in recent weeks.
Sources indicate that Hassett, the White House National Economic Council Director, is seen as being too close to Trump, causing unease in some circles. This could explain the cancellation of some interviews with candidates scheduled for early December and the later reconsideration of discussions with former Fed official Kevin Warsh.
Despite Federal Reserve Chairman Jerome Powell's term ending in May, Trump surprised investors last Friday in an interview with the Wall Street Journal by saying that Kevin Warsh was also high on the list of candidates alongside Hassett. Trump's statement, “Both Kevins are great,” quickly led to a decline in Hassett's chances in the Kalshi forecasting market.
According to Kalshi data, Hassett is still favored with a 51% probability as of Monday. However, this figure was over 80% at the beginning of the month. Kevin Warsh's chances of winning, which were around 11% at the beginning of December, have recently risen to 44%.
Sources indicate that objections to Hassett stem less from direct criticism and more from a focus on highlighting Warsh. At a JPMorgan event last Thursday, CEO Jamie Dimon spoke positively about both, but many attendees reported that Dimon's remarks gave the impression of leaning more towards former Fed official Warsh.
Bloomberg News reported in late November that Hassett was emerging as the strongest candidate to replace Powell. However, as December progressed, concerns grew that the perception of Hassett being too close to Trump could lead to a backlash, particularly in the bond market, according to some sources. This concern could cause long-term interest rates to rise and create the perception that the Fed will not remain tight enough if inflation climbs again.
In response to these criticisms, Hassett, in an interview with CBS News last week, specifically emphasized the Fed's independence. “President Trump has very strong and well-founded opinions. But ultimately, the Fed's job is to be independent and to decide on interest rates through consensus within the Board of Governors and the Federal Open Market Committee,” Hassett said, also making it clear that the president's opinions do not carry the same weight as those of a voting member of the central bank.
*This is not investment advice.
