Quick Takes:
- President Trump will pick Powell’s successor, yet Senate consent and legal safeguards still curb direct White House control of Fed policy.
- Warsh, Bessent, and Waller are the key contenders, with Warsh and especially Bessent likely to push rates lower than Powell’s path, while Waller offers near-continuity.
- Fed independence, FOMC voting checks, and market discipline will constrain any new Chair from letting politics override data.
As mid 2025 approaches, attention is turning to who will replace Jerome Powell when his term as Federal Reserve Chair ends in May 2026. President Donald Trump, now back in office, says he will name a successor soon. The chair controls US interest rate policy, so the decision carries big market stakes, especially given Trump’s push for lower rates. The president nominates but the Senate Banking Committee and then the full Senate must confirm by simple majority; past nominee Judy Shelton was rejected, underscoring this check. Chairs serve renewable four year terms, and removing one without cause is legally tough and disruptive, so Trump is expected to wait for the normal transition.
Top Candidates to Succeed Jerome Powell
Speculation centers on three leading contenders and a handful of long shots. Kevin Warsh served on the Fed Board from 2006 to 2011 and is now a Hoover Institution scholar. He says the central bank has drifted beyond its remit and calls for a strategic reset with a smaller balance sheet. Warsh argues that quieter money creation would allow lower policy rates, aligning with President Trump’s push for cheaper credit. Trump nearly chose him in 2017 and still praises him, making Warsh the market favorite.
Scott Bessent, an investment veteran sworn in as Treasury Secretary early in 2025, is the surprise name on the shortlist. He has driven the White House trade and tax agenda and is seen as a loyal executor of Trump’s goals. Although he has little published on monetary policy, his public remarks stress growth and deregulation. Analysts expect him to support faster and deeper rate cuts if inflation stays contained and to coordinate fiscal and monetary tactics more closely than under Powell.
Christopher Waller, on the Fed Board since 2020 after leading research at the St. Louis Fed, stresses that policy must remain data driven and independent. He has usually voted with Chair Powell but says he would cut rates quickly if tariff shocks raised unemployment, while tolerating temporary price spikes if long term inflation expectations stay anchored. Promoting Waller would signal broad continuity while still satisfying the White House because Trump nominated him in the first place.
Other names appear in betting markets yet draw less serious attention. Governor Michelle Bowman is sometimes mentioned because she already holds a senior Fed post. Former advisers Larry Kudlow and Kevin Hassett show up mainly for their television visibility and loyalty. Economist Judy Shelton, whose 2020 Board bid failed, still attracts chatter among gold standard supporters. Even so, insiders and investors focus on Warsh, Bessent, and Waller, since each offers a distinct direction for future interest rates and the balance between Fed independence and White House influence.
What Does the Fed Chair Do? Powers and Responsibilities
The Federal Reserve Chair is often viewed as the nation’s second most powerful economic figure, steering monetary policy to achieve price stability and maximum employment. The Chair leads the Federal Open Market Committee, sets meeting agendas, and works to build consensus among its twelve voting members on whether to raise, lower, or hold the federal funds rate, which guides borrowing costs across the economy. Though holding only one vote, the Chair’s views strongly shape outcomes.
Beyond rate calls, the Chair runs the Board of Governors, oversees thousands of Fed economists, and directs other tools such as reserve requirements, open market operations, asset purchases, and emergency lending. The role includes supervising large banks and safeguarding financial stability, balancing growth against the risk of overheating.
The Chair is also the Fed’s chief communicator, using press conferences, speeches, and testimony to guide market expectations. Forward guidance can move markets as much as actual policy changes.
While wielding broad authority, the Chair must persuade colleagues, heed economic data, respect the congressional mandate, and protect the Fed’s credibility. Effective leadership requires independent, long-term decisions that weigh inflation, employment, and the borrowing costs faced by households and businesses.
How a New Fed Chair Could Shift Monetary Policy and Interest Rates
Kevin Warsh would aim to reverse recent Fed expansion. He blames heavy bond buying for lost credibility and higher inflation, so he would cut the balance sheet and curb quantitative easing. Warsh insists on strict price control but rejects the idea that more joblessness is required to tame inflation. If money growth slows as he plans, he argues policy rates can fall sooner than Powell has signaled. Markets should expect fewer forward hints and occasional surprises that pair tough talk with selective cuts. Overall outcome: rates likely end up lower than Powell’s projected path once inflation improves.
Scott Bessent would lean firmly dovish. As Treasury Secretary he has championed the White House growth agenda, and as Chair he would press for early rate cuts if tariffs or weak data threaten jobs, even at the cost of higher short term inflation risk. His market experience could aid communication, yet close coordination with the administration may stir Senate concerns about Fed independence. Net effect: clearly lower rates than Powell intends, delivered faster.
Christopher Waller offers the least deviation. He generally votes with Powell, follows the data, and defends Fed autonomy. He would hold policy tight until inflation clearly retreats, then cut promptly if trade shocks hit employment, tolerating brief price spikes. Markets would view him as a steady hand, and Trump may see him as less flexible. Expected outcome: rate path stays near Powell’s baseline, with modest downside if growth falters.
In short, Warsh lowers rates after tightening the balance sheet, Bessent lowers sooner and more decisively, and Waller keeps to the current trajectory unless conditions worsen. Their choices will set the speed and depth of any divergence from Powell’s median outlook, shaping borrowing costs for households and businesses.
Trump’s Role in the Selection – and the Fed’s Independence
President Trump controls the nomination, so the next Chair will likely share his preference for lower rates. During his first term he publicly mocked Powell for keeping policy too tight and in 2025 called him “Mr. Too Late.” Aides even studied whether Trump could fire or demote Powell early but dropped the idea over legal and market risks. Trump now seems set to wait and install his own pick in 2026, keeping up a pressure campaign that has already shaped headlines and forced Fed officials to defend their independence.
Expect Trump to nominate someone he sees as loyal, whether Warsh, Bessent, Waller, or another ally. Yet once confirmed, a Chair cannot be removed without cause, and the FOMC’s mix of Board governors and regional bank presidents dilutes any one person’s power. A dovish new Chair would still need majority support to push big rate cuts.
History shows Fed leaders often defy the presidents who appointed them. Volcker stayed tight under Reagan, and Powell raised rates despite Trump’s attacks. If markets suspect a politicized Fed, inflation fears drive long-term yields up, forcing tighter policy anyway. All three leading candidates acknowledge this risk and vow to protect the Fed’s credibility.
Congress could someday rewrite the Fed’s mandate, but open attempts to curb independence would spark backlash and roil markets. The likelier path is subtler: Trump will jawbone and pick a sympathetic Chair, nudging policy slightly more dovish than under a Biden appointee, yet still within the bounds of data and institutional norms.
Whoever Trump nominates will steer the cost of credit for households and businesses, yet must still satisfy the Senate and preserve the Fed’s credibility. A dovish pick could mean cheaper loans but higher inflation risk, while a steadier hand would likely keep to Powell’s path and prioritize price stability. The outcome will ripple through every mortgage rate, bond yield, and investment decision for years to come.