Trump signals Kevin Hassett as top pick to replace Powell, markets brace for shift

President Donald Trump gave his clearest signal yet that National Economic Council Director Kevin Hassett is the favourite to succeed Jerome Powell as chair of the Federal Reserve, sharpening market focus on the central bank's future path for interest rates.

The remarks deepen Trump's long-running campaign against Powell, whom he has repeatedly castigated for keeping borrowing costs too high.

Trump sharpens criticism of Powell. Trump again derided Powell's leadership at a Cabinet meeting on Tuesday, and insisting the central bank should be cutting rates more aggressively.

The president has for months demanded deep reductions in interest rates, arguing that inflation is contained and that high borrowing costs are hurting both the housing market and the government's own debt service.

Federal law limits the president's ability to remove a Fed chair over policy disagreements, meaning Powell is expected to serve out his term, which runs through May 15, 2026.

Trump has instead turned his attention to the succession, signalling he wants a chair more aligned with his push for lower rates and looser financial conditions.

Independence stress test

Hassett emerges as a leading contender. Trump said he had considered about 10 candidates for the Fed job but had "it down to one," indicating a decision will be announced in early 2026.

At a White House event later the same day, he suggested a "potential" future Fed chair was in the room before thanking Hassett by name, a remark widely read in Washington and on Wall Street as a deliberate nod.

Hassett, 63, is an economist and longtime Trump adviser who currently runs the National Economic Council and previously chaired the Council of Economic Advisers in the first Trump administration.

Investors view him as more politically attuned to the White House than Powell, heightening expectations that a Hassett-led Fed could move faster to cut interest rates if growth slows.

Markets weigh Fed independence risk.

The Federal Reserve, which manages a balance sheet of several trillion dollars and oversees the banking system, has traditionally operated at arm's length from the White House to shield monetary policy from short‑term political pressure.

Trump's public lobbying campaign and his attacks on Powell have already raised questions among investors and economists about the durability of that independence.

Analysts say the choice of Powell's successor will shape expectations for everything from mortgage rates to corporate borrowing costs, as well as the dollar's trajectory.

While any nominee must win Senate confirmation, Trump's latest hints suggest markets may soon have to price in a Fed led by one of his closest economic allies.