In a move that adds fresh uncertainty to US economic policy, former President Donald Trump has indicated he has a favourite candidate to lead the Federal Reserve but will wait until January to make the announcement. Simultaneously, he reignited his long-running feud with the current chair, Jerome Powell, suggesting he might still fire him.
Trump's January Reveal and Powell's Precarious Position
Speaking at a press conference at his Mar-a-Lago resort in Florida on Monday, Trump confirmed he has a preferred candidate for the crucial post of Federal Reserve Chair. "I do, still do — hasn’t changed," Trump stated when questioned about his favourite. He plans to announce the name "sometime in January," emphasising there is "plenty of time."
However, the spotlight remained firmly on the current chair, Jerome Powell. Trump asserted that Powell "should resign" and that he would "love to fire him." He revealed that he came close to seeking Powell's ouster in July but retreated after a negative reaction from financial markets. "Maybe I still might," Trump told reporters, keeping the threat alive.
The Contenders and the Contradictions
While Trump did not specify his leading candidate, names circulating as potential picks include National Economic Council Director Kevin Hassett, seen by many as the frontrunner, and former Fed governor Kevin Warsh. Other individuals reportedly in the mix are current Fed governors Christopher Waller and Michelle Bowman, along with BlackRock's Rick Rieder.
The selection process has been marked by Trump's cryptic and sometimes conflicting remarks. Earlier in December, he claimed to have narrowed the pool to one person, only to later say he was considering multiple candidates, praising several on the shortlist.
Policy Clash and a Potential Lawsuit
The core of Trump's dissatisfaction with Powell stems from monetary policy. Trump, who originally appointed Powell during his first term, has been a persistent critic, wanting the Fed to cut interest rates more aggressively to help lower mortgage costs. Although the Fed has lowered rates at its last three meetings, officials signalled in December that further cuts might be limited, with possibly just one in 2026.
Adding a new dimension to the conflict, Trump mentioned on Monday that he was considering a "gross incompetence" lawsuit against Powell related to an ongoing renovation project at the Federal Reserve. Powell's term as chair ends in May 2026, but his term on the Fed's Board of Governors lasts until 2028. If Powell chooses to stay on the board after his chairmanship ends, he would block Trump from appointing another new member, a significant point of contention.
The ongoing drama highlights the profound uncertainty surrounding the leadership of the world's most influential central bank. Trump's pending January announcement and his volatile stance towards Powell set the stage for major shifts in US monetary policy direction, with global implications for markets and economies, including India's.
