- Frustration grows as Trump criticizes Powell for slow rate cuts amid ongoing trade tensions.
- Trump considers several loyalists for the Fed role, including Kevin Warsh and Scott Bessent.
- Although Powell’s term ends in 2026, markets speculate a leadership change may come earlier.
Federal Reserve Chairman Jerome Powell is facing criticism after the Fed maintained interest rates at the same levels in June. President Donald Trump has rebuked Powell over his failure to cut rates efficiently, particularly in the face of the trade tariffs. The frustration with Trump is increasing each day, so there may be some uncertainty about Powell and whether he will be replaced.
The main area of concern for Trump is the delay of interest rate cuts. He assumes that the Federal Reserve is failing to act fast enough in facilitating economic growth. The European Union (EU), which introduced ten rate reductions compared to the Fed’s unwillingness. Trump has repeatedly stated that he believes the Fed’s position is a hindrance to economic recovery.
Trump Narrowing Down Fed Chair Successor Candidates
Since he has criticized him severally, Trump is yet to appoint a successor to Powell. Nevertheless, he has alluded to the fact that he has reduced his candidates to a select number of applicants. During a NATO summit, Trump also disclosed that he was thinking of three or four potential nominees. The candidates with close ties to Trump include Kevin Warsh, Kevin Hassett, Chris Waller, and David Malpass.
Warsh, Hassett, Waller, and Malpass are regarded as those who share Trump’s views on monetary policy. These candidates are more likely to support Trump in his consistent demands that rate cuts should be even quicker. Additionally, Hassett and Bessent hold crypto-friendly views. These views can be attributed to the fact that Trump is known for taking strong monetary positions.
Scott Bessent, a candidate for the position of Treasury Secretary, is regarded as a solid candidate. He is regarded as the man who would defend Trump in his economic vision such as lowering interest rates as a method of growth. The policies adopted by Bessent might also change the Fed policies to more accommodating monetary tools.
Trump’s Effort to Dismiss Powell Faces Legal Hurdles
Although Trump has often floated the idea of firing Powell, it is not necessarily an easy task. A recent decision by the Supreme Court confirmed that the Federal Reserve was independent of the executive branch. This decision has given Powell some security against possible removal. The last time Trump tried to dismiss Powell, he was confronted with a market revolt that forced him to back down.
Related: Trump Eases Tariffs on China, Drops Termination Plan on Powell
The issue between Trump and Powell is the issue of interest rates and inflation. Trump is pointing to the Fed to reduce the lending rate to stimulate growth. As Powell suggests, however, he thinks tariff policies may spike up prices, undermining measures against inflation. Their perceptions have remained a bone of contention.
Powell is the chairman whose term in office will expire in 2026; however, there are rumours about a change of the chair through a substitute. The betting market has already started giving odds on who could succeed Powell.
Kevin Warsh is the front-runner with 23%, followed by Chris Waller with 21%, and Kevin Hasset with 17%. The remaining top five candidates are Scott Bessent and Judy Selton. There is a 16% possibility that no announcement will be made at all this year.
Source: Polymarket
The choice of Powell’s successor will carry a long-term legacy to the United States’ monetary policy. Whoever assumes command at the Federal Reserve will have an effect on the course of U.S. economic policy. This is particularly true when associated with the ongoing trade tensions and inflation concerns.
