Trump wants to hold a "final interview" for the Federal Reserve Chair.

Author: Long Yue Source: Wall Street News

The selection process for the next Federal Reserve Chairman is entering its final stage. Although White House National Economic Council Director Hassett is currently in the lead, Trump's decision to launch the final round of interviews indicates that the final candidate is far from being decided.

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

This latest development indicates that Hassett's nomination is not a sure thing. In addition to Hassett and Warsh, the final shortlist includes two other candidates from among Federal Reserve Governors Waller and Bowman, as well as BlackRock executive Rick Reid. 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 concern that Hassett, who has close ties to the president, might be too aggressive in cutting interest rates, thus posing a potential risk to the market. Hassett is leading, but his term may be uncertain. In recent weeks, Hassett has become the frontrunner to succeed Powell. However, Trump administration officials have proposed that Hassett serve a shorter term as Federal Reserve Chairman. The regular term for Federal Reserve Chairman is four years, renewable. Two other sources familiar with the matter said that Hassett himself proposed to Bessett that he succeed Powell on the Federal Reserve Board of Governors, a position that runs until January 2028. This flexibility leaves room for future personnel arrangements. Bessett Still Has a Chance of Taking Over the Federal Reserve Treasury Secretary Bessett played a key role in the selection process. According to officials, he submitted a list of four names to the White House, including Hassett and Warsh. Although Trump has repeatedly stated publicly that he wants Bessett to become Fed Chair, Bessett himself has indicated he has no interest in the position. However, a shorter term for Hassett could pave the way for him to take over the Fed later in Trump's second term. This potential arrangement suggests a longer-term strategic consideration behind the current selection process. Market Concerns and Hassett's Response Hassett's leading position has caused unease among some bond investors. These investors reportedly told the Treasury Department that they are worried Hassett might aggressively cut interest rates. They believe that if this move leads to persistently high inflation, it could shake the $30 trillion U.S. Treasury market. To alleviate market concerns, Hassett 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 Fed chairman's "most important job" is to "focus on economic data and avoid getting involved in politics." The entire selection process took place against the backdrop of Trump's long-standing criticism of current Chairman Powell. Over the past year, Trump has consistently attacked Powell for failing to lower borrowing costs faster and more significantly. The market widely expects the Fed to announce a 25 basis point rate cut this Wednesday, lowering the target range for the federal funds rate to a three-year low of 3.5% to 3.75%. Even so, Trump has publicly called for reducing U.S. borrowing costs to 1%. For any new governor, striking a balance between the president's expectations and maintaining the central bank's independence will be a tremendous challenge.