Trump wants to hold the "final interview for the Federal Reserve Chairman," and Hassett is not yet "set in stone," while Bessent still hopes to succeed him later?

The selection of the next chairman of the Federal Reserve is entering its final stages. Although White House National Economic Council Director Kevin Hassett is currently in the lead, President Trump’s decision to initiate the final round of interviews indicates that the final candidate is far from being "set in stone."

Today, according to the Financial Times citing three senior U.S. government officials, Trump and Treasury Secretary Steven Mnuchin plan to meet with former Federal Reserve Governor Kevin Warsh this Wednesday. This move marks the official start of the final round of interviews to find a successor to current chairman Jerome Powell.

This latest development suggests that Hassett's nomination is not a sure thing. In addition to Hassett and Warsh, the final candidate list also includes other contenders from Federal Reserve Governors Christopher Waller and Michelle Bowman, as well as Rick Rieder, an executive at BlackRock. The final decision is expected to be announced in early January next year.

The core impact of this personnel change lies in the future direction of monetary policy. Some Wall Street investors have expressed concerns that Hassett, who has close ties to the president, may be too aggressive in cutting interest rates, potentially posing risks to the market.

Hassett in the Lead, but Term May Be Uncertain

In recent weeks, Hassett has become a popular candidate to succeed Powell. However, Trump administration officials have floated the idea of having Hassett serve a shorter term as Federal Reserve chairman than the usual term. The standard term for a Federal Reserve chairman is four years, with the possibility of reappointment.

Two other informed sources stated that Hassett himself had suggested to Mnuchin that he take Powell's seat on the Federal Reserve Board, which has a term ending in January 2028. This flexibility in arrangements leaves room for future personnel planning.

Mnuchin Still a Possible Candidate for the Fed

Treasury Secretary Mnuchin plays a key role in this selection process. According to officials, he submitted a list of four names to the White House, which includes both Hassett and Warsh. Although Trump has publicly expressed a desire for Mnuchin to serve as Federal Reserve chairman, Mnuchin himself has stated he has no intention of taking that position.

However, if Hassett's term is shortened, it could pave the way for Mnuchin to take over the Federal Reserve later in Trump's second term. This potential arrangement suggests there may be longer-term strategic considerations behind the current selection process.

Market Concerns and Hassett's Response

Hassett's leading position has raised concerns among some bond investors. Reports indicate that these investors have expressed to the Treasury their worries that Hassett may aggressively cut interest rates. They believe that if such actions lead to persistently high inflation, it could shake the $30 trillion U.S. Treasury market.

To alleviate market concerns, Hassett has recently attempted to emphasize the importance of central bank independence. At an event on Tuesday, he stated that while he believes there is still room for further rate cuts, the "most important job" of the Federal Reserve chairman is to "focus on economic data and avoid getting involved in politics."

The entire selection process is occurring against the backdrop of Trump's long-standing criticism of current chairman Powell. Over the past year, Trump has repeatedly attacked Powell for not lowering borrowing costs more quickly and significantly. The market widely expects the Federal Reserve to announce a 25 basis point rate cut this Wednesday, bringing the federal funds rate target range down to a three-year low of 3.5% to 3.75% Even so, Trump still publicly called for reducing U.S. borrowing costs to 1%. For any new president, balancing the expectations of the presidency with maintaining the independence of the central bank will be a significant challenge