President Donald Trump has reportedly finalised his choice for the next Chair of the United States Federal Reserve, with prediction markets strongly favouring Kevin Hassett, the current Director of the National Economic Council, for the pivotal role.
Trump's Veiled Confirmation and Market Speculation
While speaking to reporters aboard Air Force One on Sunday, President Trump confirmed he has made his decision, stating, "I know who I am going to pick." However, he playfully refused to reveal the name, answering "I’m not telling you, we’ll be announcing it" when directly asked if Hassett was his choice. The announcement is expected before the Christmas break.
Prediction markets are overwhelmingly betting on Hassett. The Kalshi website places his odds at approximately 82%, while Polymarket estimates them at around 73%. Former Fed governor Kevin Warsh is a distant second in the betting odds.
Hassett's Stance and Immediate Market Reactions
When questioned about the speculation on CBS's 'Face the Nation', Hassett declined to comment on his prospects but outlined the expected qualities of Trump's nominee. He suggested the American people should expect a pick focused on delivering "cheaper car loans and easier access to mortgages at a lower rate."
He also pointed to recent market activity as a positive sign, citing solid demand in a $69 billion auction of 2-year Treasury notes last week. Following the rumours of his potential appointment, benchmark financial indicators showed movement:
- The yield on the 10-year Treasury note rose sharply to 4.064% from last week's sub-4% levels.
- The U.S. dollar index fell 0.4% against a basket of major global currencies.
- Early trading saw S&P 500 futures down 0.6% and Dow Jones Industrial Average futures down 0.4%.
Analysts Weigh Risks to Fed Independence and Economic Outlook
A primary concern for global markets has been the potential erosion of the Federal Reserve's independence. President Trump has frequently criticised current Chair Jerome Powell and moved to oust Fed governor Lisa Cook earlier this year.
Paul Ashworth, chief North America economist at Capital Economics, believes a Hassett appointment would likely be confirmed quickly by the Senate. "He’s an ex-Fed insider... However, we suspect that, while he would pay lip service to Trump’s demands, we don’t think he would represent a genuine danger to the Fed’s independence," Ashworth noted.
This sentiment aligns with warnings from analysts at Bank of America, led by Ralf Preusser, who stated last month that "Fed independence risks are still seen as underpriced" by the market, potentially leading to a weaker dollar and higher long-term bond yields.
Louis Navellier of Navellier Calculated Investing offered a different perspective, suggesting Trump is seeking a positive economic spokesperson. "One thing that I can say about Kevin Hassett is that he always seems to be happy when he talks to the media," Navellier said. "Kevin is a ‘glass half full’ guy... If President Donald Trump nominates him, he is obviously demanding loyalty, but also an upbeat economic spokesperson for the Fed."
As the world awaits the official announcement, the focus remains on how this key appointment will shape monetary policy, market stability, and the cherished independence of the world's most influential central bank.
