Warsh Overtakes Hassett As Fed Chair Favorite

“I think the two Kevins are great,” said Trump on Friday, but this weekend has prompted a rather violent shift from one Kevin (Hassett) to the other Kevn (Warsh) who has now become the prediction market’s favorite to replace Powell…

Source: Polymarket

CNBC reports that Kevin Hassett’s candidacy for the Federal Reserve chair, once seen by the market as almost a sure thing, has received some pushback by high-level people who have the ear of President Trump, according to sources familiar with the matter.

There’s concern that the National Economic Council director is too close to the president, the sources said, something that ironically made him the frontrunner to replace current chair Jerome Powell in the first place.

After telling reporters that he knew who he was going to pick for Fed chair, Trump surprised investors Friday when he told the Wall Street Journal in an interview that former Fed Governor Kevin Warsh had moved to the top of the Fed candidates list alongside Hassett. 

CNBC notes that as December wore on, according to several sources, Hassett’s candidacy received some resistance, with worries growing that the bond market could revolt over time if it sees him as too much in the pocket of Trump. That view could end up having the opposite effect Trump wants, with long-term yields eventually rising on concern Hassett wouldn’t do enough to contain inflation should it ever rebound down the road.

Perhaps in response to some of this criticism, Hassett was more firm on the question of Fed independence in an interview with CBS News this past weekend.

Trump “has very strong and well-founded views about what we ought to do. But in the end, the job of the Fed is to be independent and to work with the group of people that are on the Board of Governors, at the FOMC, to drive a group consensus on where interest rates should be,” said Hassett on “Face the Nation,” according to a transcript.

“No, no, he would have no weight,” Hassett said when asked whether Trump’s opinions would have equal standing with members of the Federal Open Market Committee (FOMC), the Fed’s rate-setting body.

“It’s just his opinion matters if it’s good … if it’s based on data, and then if you go to the committee and you say, ‘Well, the president made this argument, and that’s a really sound argument, I think, what do you think?’ If they reject it, then they’ll vote in a different way.”

Hassett, who currently serves as director of the White House National Economic Council, said he speaks with Trump frequently about economic issues and would continue to do so if he were appointed to lead the central bank.

“I think he has very strong and well-founded views about what we ought to do,“ Hassett said of Trump.

”But in the end, the job of the Fed is to be independent and to work with the group of people that are on the Board of Governors, at the FOMC, to drive a group consensus on where interest rates should be.”

Hassett said that while the Fed chair would offer guidance to the FOMC during interest rate deliberations, “in the end, it’s a committee that votes.”

Trump told the Journal that the next Fed chair should consult with him on interest rates, though he acknowledged that the central bank chief should not simply follow the president’s orders.

“I’m a smart voice and should be listened to,” Trump said, citing his business experience and financial success.