Trump Narrows Fed Chair Shortlist to Four as Markets Watch Closely
Bessent bows out, 'both Kevins' in the lead as investors brace for a policy shift.
President Donald Trump has trimmed his shortlist to replace Federal Reserve Chair Jerome Powell down to four finalists, confirming in a Tuesday CNBC interview that Treasury Secretary Scott Bessent has officially removed himself from consideration. The decision comes amid Trump’s sustained criticism of Powell and mounting speculation about the central bank’s direction in the final months of Powell’s term.
“I love Scott, but he wants to stay where he is,” Trump said. “I asked him just last night, ‘Is this something you want?’ ‘Nope, I want to stay where I am.’”
Warsh, Hassett Rise to the Fore
Trump publicly named two of the four remaining contenders: former Federal Reserve Governor Kevin Warsh and National Economic Council Director Kevin Hassett. Both men have long-standing relationships with the Trump administration and are known advocates for lower interest rates—a position that aligns closely with Trump’s agenda.
Trump told CNBC:
I think I say Kevin and Kevin, both Kevins are very good, and there are other people that are very good too, but a lot of times, a lot of times, they’re very good, like this character that we have in there now, Jerome too late Powell, he was very good.
Though Trump declined to identify the other two finalists, people familiar with the matter believe Fed Governor Christopher Waller and former World Bank President David Malpass may still be in contention. Prediction markets responded swiftly. On Kalshi, Warsh and Hassett each received 35% odds of being named Powell’s successor, with Waller falling to 15% following Trump’s remarks.
Powell’s term expires in May 2026, though his term as a member of the Fed’s Board of Governors runs through 2028. Trump, who appointed Powell during his first term, has spent the better part of his second presidency criticizing Powell’s refusal to aggressively lower interest rates. His frustration has only intensified as tariffs and trade uncertainty pressure the U.S. economy.
Source: CNBC Television YouTube
Markets Brace for a Pivot
The U.S. Dollar Index (DXY) rose 0.3% on Tuesday, climbing to 98.88 after hitting a one-week low earlier in the session. The greenback gained ground against major currencies, including the Euro (EURUSD), which dropped 0.2% to $1.1553, and the Japanese Yen (JPYUSD), which weakened 0.2% to 147.42 per dollar. The British Pound (GBPUSD) remained flat at $1.3292, while the Swiss Franc (CHFUSD) held steady at 0.8072.
Investors are betting heavily on a shift in Fed policy once Trump appoints new leadership. According to the CME’s FedWatch Tool, markets are pricing in an 88% chance of a rate cut at the Fed’s next meeting in September. Futures now anticipate 130 basis points of total cuts by October 2026—30 points more than just a week ago.
Goldman Sachs (NYSE: GS) now expects the Fed to deliver three consecutive 25-basis-point cuts starting in September. The firm noted that a sharper move—potentially 50 basis points—is possible if unemployment continues to climb.
The financial world sees Trump’s upcoming Fed appointments as pivotal. Analysts at Bannockburn Forex said the market is in “consolidation mode,” waiting for Trump’s next move. “What we’re waiting for is the next day or two,” said Marc Chandler, chief market strategist. “People are expecting Trump to announce who’s going to replace the retiring Fed governor and who’s going to be at the BLS.”
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Kugler’s Exit Sparks Opportunity
In addition to the Powell succession, Trump now holds another key nomination after the surprise resignation of Fed Governor Adriana Kugler. Appointed by President Joe Biden, Kugler was expected to serve through January 2026 but will step down this week, giving Trump the chance to further reshape the Fed’s composition.
“Don’t forget, we have somebody that left early, which was a pleasant surprise,” Trump said. “I’m going to be announcing that very shortly, too.”
Two Fed policymakers recently dissented from the July decision to hold rates steady between 4.25% and 4.5%, advocating for a quarter-point cut. Kugler was absent from that vote, and her successor could tip the scales in future decisions—particularly if Trump selects a known dove.
The President has not revealed when he’ll make a final decision on Powell’s replacement, but emphasized that he’s in no rush. “It will be one of four people,” Trump reiterated. “In the end, there are numerous people who are very qualified.”
Political Tensions at the Fed
Trump’s open hostility toward Powell has raised eyebrows within the financial community and inside the Fed itself. Vice President JD Vance previously accused the Fed of “monetary malpractice,” while Budget Director Russell Vought blasted Powell for a “fiscal mismanagement” scandal surrounding the $2.5 billion Fed headquarters renovation.
Still, despite Trump’s critiques, Powell has defended the Fed’s independence and reiterated the need for a steady, data-driven approach to monetary policy.
Trump’s shortlist announcement has made one thing clear: he intends to reshape the Fed in his image. Whether the central bank resists or adapts remains to be seen. For now, the spotlight turns to Warsh, Hassett, and two unnamed contenders as financial markets, policymakers, and global investors await the next big name from 1600 Pennsylvania Avenue.
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