Key Points
- Trump appears to be serious about replacing Fed Chair Jerome Powell.
- He has cut down the shortlist to include Kevin Hassett, Kevin Warsh, and two other unnamed candidates.
- Adriana Kugler's sudden resignation gives Trump an unexpected board seat to fill, and Trump could use this to influence the Fed before Powell’s end of term.
President Trump has confirmed that his shortlist for the next Fed Chair has been narrowed down to four names. Speculators now know that two shortlisted candidates include economic adviser Kevin Hassett and former Fed governor Kevin Warsh.
However, the remaining two are still under wraps. The decision comes when the president attempts to influence the FED’s direction ahead of Jerome Powell’s scheduled exit next year.
Trump Eyes a Larger Role in Fed’s Future
Trump recently spoke to reporters and appeared in a CNBC interview on August 5. There, he mentioned that the unexpected resignation of Adriana Kugler from the Fed Board of Governors was a “pleasant surprise”.
He also said that this opens the door to a strategic appointment that could go beyond the short term.
President Trump made it clear he intends to announce a new Fed governor by the end of the week. He mentioned that the vacancy left by Adriana Kugler has provided him with a great opportunity.
In addition, he hinted that whoever fills her seat might also be his nominee to replace Jerome Powell as Fed Chair. “We’re also looking at the Fed Chair, and that’s down to four people right now,” Trump said. “Two Kevins and two other people.”
Trump didn’t name the remaining two candidates. However, one of them is believed to be Christopher Waller, a current Fed Governor.
Which “Two Kevins” Could Lead The Fed?
Both Kevin Hassett and Kevin Warsh have deep ties to the Trump administration and conservative economic policy. Kevin Hassett for example, is the director of the National Economic Council.
He served as one of Trump’s economic advisers during his previous term. He is also known for his market-friendly views and for being an advocate for growth-focused monetary policy.
Kevin Warsh on the other hand, is a former Federal Reserve governor. Warsh has been a vocal critic of current Fed leadership. He has background stints in the private sector, as well as close ties to previous Republican administrations.
Trump showed confidence in both candidates during the CNBC interview. He also stated “I think Kevin and Kevin, both Kevins, are very good.”
Kugler’s Exit And Trump’s Advantage
Adriana Kugler’s decision to step down as a Fed governor caught many by surprise. Her term was expected to last until January of next year, a few months before Powell’s.
However, her early resignation means that Trump gets to appoint a replacement over the short term, and influence the long-term.
Kugler recently resigned, leaving one seat open for Trump to fill | Source: X
In other words, Kugler's leaving office gives Trump a chance to install someone more aligned with his economic views. This could happen right before choosing a successor to Powell.
The initial appointment would only last a few months. However, Trump could nominate the same person for a full 14-year term afterwards.
The Rift Between Trump and Powell
Trump’s relationship with Jerome Powell has been rocky for years. The President has frequently criticized Powell for being too slow to cut interest rates.
Recently, Trump even floated the idea of removing Powell before the end of his term. However, a Supreme Court ruling indicates that a sitting Fed Chair can only be removed for just cause:
Not for policy disagreements. Trump also took the opportunity to blame Powell again in the CNBC interview for not acting fast enough on interest rates.
He also took the opportunity to distance Scott Bessent, the current Treasury Secretary, from the Fed Chair race. “I love Scott, but he wants to stay where he is.” Trump said.
