Kevin Hassett, Trump’s Likely Pick for Next Fed Chair, Divides Markets

Kevin Hassett, director of the National Economic Council, is a likely pick for Fed chair. (Al Drago/Bloomberg)

Key Points

• President Donald Trump is expected to nominate Kevin Hassett as the next Federal Reserve chair, with Polymarket pricing an 80% chance.
• Hassett’s potential nomination raises concerns about the Federal Reserve’s independence and its focus on inflation versus growth.
• Markets have reacted positively to the prospect of Hassett as chair, anticipating a prolonged easing cycle in the U.S.

President Donald Trump has said he has narrowed down his search for the next Federal Reserve chair to one candidate, and nearly all signs point to his longtime economic advisor Kevin Hassett as that person.

While the president has said he won’t make the official announcement until early next year, Trump smirked when reporters asked if it would be Hassett, which many have taken as a positive signal. Prediction site Polymarket is pricing about an 80% chance Kevin Hassett is the president’s pick.

Attention on Wall Street and in the Beltway has already shifted to how Hassett, often seen as Trump’s loyalist economist, will guide monetary policy.

Hassett’s nomination would mark a major step toward accomplishing Trump’s ambitions for the central bank. The president long argued that current Chairman Jerome Powell held rates too high and moved too slowly to ease financial conditions. Hassett, currently the director of the National Economic Council, has been a reliable voice in Trump’s inner circle, defending tariffs, arguing that Trump’s policies lifted real wages and describing inflation as a lingering but manageable problem. He has supported faster rate cuts.

If nominated and then approved by the Senate, he would likely be a Fed chair who is closely aligned with the White House’s economic message and willing to place more weight on employment and market stability than on the remaining risks to inflation.

Markets have already been digesting the possible new chair, and while muted, their overall reaction has been positive.

“The prospective appointment of Kevin Hassett to Chair the Fed has been viewed more favorably than what would have occurred if other contenders were the favorites,” wrote Thierry Wizman at Macquarie Group. They are anticipating “that a change in the Fed’s leadership in spring 2026 could extend the easing cycle in the U.S. even further,” he said.

The shift comes at a moment of transition for the Fed. Trump could soon secure a majority on the seven-member board of governors, giving the administration more influence over monetary policy. The nomination follows Trump’s attempt to remove Gov. Lisa Cook, which has been halted by the Supreme Court pending a hearing in January. All this has raised concerns about the Fed’s independence, and Hassett’s elevation will bring more questioning, especially by foreign central banks and global investors as they adjust to a more unpredictable environment.

Hassett arrives with a résumé that spans academia, government and the Fed. He worked as an economist at the central bank early in his career, spent many years at the American Enterprise Institute and chaired Trump’s Council of Economic Advisers during the 2017 tax overhaul. He has argued that monetary policy should be more transparent and guided by clearer rules so that investors understand how the Fed reacts to changes in inflation and employment.

His critics point to episodes that raise doubts about his judgment. Hassett co-wrote the book Dow 36,000 in 1999, which projected that equity valuations would rise sharply. Instead, they collapsed in the dot-com bust. During the early months of the Covid pandemic he circulated an estimate that suggested fatalities would fall to zero by mid-May 2020. Epidemiologists called the model inaccurate and dangerously optimistic. These moments, along with his recent role as a political defender of the administration, have left some economists and market participants uneasy about how he will balance analysis with loyalty.

But while Wall Street may celebrate easier policy, many analysts also worry that lowering interest rates quickly will ultimately reinvigorate inflation and cause economic distress.

“Markets appear willing to give [Hassett] the benefit of the doubt—for now—but any perception that policy will systematically favor growth over price stability could risk unanchoring expectations and potentially impair the reasons why bonds have become an effective portfolio diversifier over the past quarter-century.” wrote Lawrence Gillum at LPL Financial Research.

Powell’s final months as chair could now be overshadowed by the presence of a successor who will shape expectations before taking office. Powell has spent the past several years defending the institution’s credibility and insisting that decisions rest on data rather than political preference.

If nominated, Hassett would be inheriting a different environment. Hassett will need to convince investors that he can guide policy with discipline and independence even as he remains one of the president’s most trusted advisors. That challenge will define not only his tenure but also the influence and reputation of the Federal Reserve in the years ahead.

Write to Nicole Goodkind at nicole.goodkind@barrons.com