Markets view the Federal Reserve chairman debate as hawks versus doves.
And then there were two.
President Donald Trump has narrowed the field for the next Federal Reserve chair to National Economic Council Director Kevin Hassett and former Federal Reserve board member Kevin Warsh—and the dichotomy between the two men could have implications for Wall Street.
Trump said last week that Warsh climbed to the top of the list to succeed Chair Jerome Powell as head of the central bank next year, following a 45-minute meeting on Dec. 10. However, Hassett reclaimed the lead in prediction markets after remarks about Fed independence.
On Kalshi and Polymarket, Hassett is given a 53 percent chance of being nominated as Fed chair.
Wall Street might have diverging views as financial markets are poised to respond markedly differently depending on whether Trump selects Hassett or Warsh, according to Tom Essaye, president and cofounder of the Sevens Report.
The Hassett versus Warsh debate, Essaye said, has centered mainly on Fed independence.
The White House official might take a more hawkish stance, pushing for sharper rate cuts. The former Fed insider may move more cautiously.
In a Dec. 16 interview with CNBC’s “Squawk on the Street,” Hassett endorsed central bank independence and argued that forging consensus is a critical tool for the position.
“The Federal Reserve’s independence is really, really important, and the voices of the other people at the [Federal Open Market Committee], they’re important, too,” he said. “So the way you’ve got to drive interest rate movements is with consensus based on the facts and the data.”
For months, the president has suggested that Powell’s replacement should be more open to cutting interest rates, adding that the individual should consult with him on policy decisions.
“I’m looking for somebody that will be honest with interest rates,” Trump said at a roundtable. “Our rate should be much lower.”
By Andrew Moran
