Fed Chair Race: Only Appoint Those Willing to Cut Interest Rates!

Trump publicly named former Federal Reserve Board member Kevin Wash as the top candidate for the next Federal Reserve Chair after meeting with Kevin Wash, marking the intensification of a battle for control over the world’s most important central bank.

In Trump’s view, the chair of the Federal Reserve seems to be just a “rate cut permit” that can execute his will. On December 13, Trump announced to the media that after meeting with Wash, the former Fed board member had risen to the top of his list of candidates for the next Fed Chair.

He had previously set clear criteria for the Fed Chair: only appoint “willing to cut rates” candidates.

1. Power Struggle

● For Fed Chair Jerome Powell, his term is entering a countdown full of uncertainty. Although his chairmanship will end in May 2026, his term as a Fed board member extends until January 2028. This means that even without being the chair, he could still remain in the Fed decision-making circle.

● The conflict between Trump and Powell has long existed. As early as July this year, The New York Times disclosed that Trump had drafted a letter to dismiss Powell. Trump’s dissatisfaction mainly focused on Powell’s “slow rate cuts” and his adherence to the Fed’s “independent operation” principles.

● However, from a legal perspective, the U.S. President cannot dismiss the Fed Chair at will. This system design is precisely to ensure that monetary policy is not subject to short-term political interference. Tiffany Wilding, an economist at Pacific Investment Management Company, pointed out that Trump is more likely to reshape the Fed’s landscape through personnel appointments rather than direct dismissal.

2. Candidate Competition

This contest for Fed Chair is essentially a showdown between two “Kevins”—Kevin Wash and Kevin Hasset.

● Wash was considered a Fed Chair candidate by Trump in 2017. He has direct experience working within the Fed, having served as a Fed governor from 2006 to 2011. Hasset is currently the director of the White House National Economic Council and a key economic advisor to Trump.

● In this “loyalty test,” both candidates have shown positions highly aligned with Trump’s policies. Hasset publicly stated that if data shows it, “there is ample room for significant rate cuts.” He even explicitly said that the rate cut could “exceed 25 basis points.”

● Wash criticized the Fed for overreacting to Trump’s tariff policies, believing that inflation caused by tariffs is “temporary,” and that the Fed’s reluctance to cut rates “is eroding its credibility.”

Candidates

Current Position

Trump’s Relationship

Kevin Wash

Former Fed Governor

Longtime admirer, interviewed in 2017

Kevin Hasset

Director of the White House National Economic Council

Core economic advisor, close relationship

3. Policy Proposals

● In a recent series of remarks, Wash proposed more aggressive reforms than Hasset. He not only called for rate cuts but also advocated for a “systemic reform” of the Fed. He publicly criticized internal “overstaffing” at the Fed and called for “bringing in some new talent.”

● Wash also proposed a disruptive idea: the Fed should coordinate with the Treasury Department on how the country manages bond issuance. He suggested, “We need a new agreement between the Treasury and the Fed, just like we did in 1951.”

This proposal to tie monetary policy more closely with fiscal policy runs counter to the traditional idea of Fed independence.

● Regarding Trump’s tariff policies, Wash provided “theoretical support,” believing that “tariffs will not cause inflation,” and that price increases due to tariffs are “one-time price changes.” This stance sharply contrasts with many economists’ views.

● Although Hasset also supports rate cuts, his statements are more cautious. He emphasizes that the Fed Chair’s duty is to “observe data and make adjustments,” and believes that announcing the future six months’ rate path in advance is “irresponsible.”

4. Market and Reactions

● Trump’s public interference in Fed personnel decisions has sparked widespread concern. Democratic Senator Elizabeth Warren explicitly expressed worry that Trump might appoint a “puppet” as Fed Chair.

● Wall Street is also uneasy. JPMorgan Chase CEO Jamie Dimon warned that “the independence of the Fed is crucial,” and interference often “can lead to adverse consequences.”

● From the market perspective, the Fed Chair race has begun to influence investor behavior. A research report from Wealth Group pointed out that uncertainty about the rate path is causing chaos in market estimates. Although markets previously expected three rate cuts by 2025, the probability of the first rate cut in September is now only 21%.

● The U.S. economy faces a “triple challenge”: high debt (national debt surpassing $37 trillion), high inflation (core PCE still at 2.7%), and high valuations (S&P 500 forward P/E ratio at 22.2). Under these circumstances, politically driven rate cuts could repeat the “Great Inflation” of the 1970s.

5. Historical Comparison

Conflicts between U.S. Presidents and Fed Chairs are not new.

● Historically, President Lyndon Johnson clashed with Chairman Martin over Fed rate hikes; President Richard Nixon also pressured Chairman Arthur Burns to maintain loose monetary policy.

● However, Trump’s approach is fundamentally different from his predecessors. Not only has he publicly criticized, but reports suggest he even drafted a resignation letter. Such direct challenges to Fed independence are “unprecedented in U.S. history.”

● Unlike past conflicts, Trump has begun actively screening replacement candidates, not just exerting verbal pressure. In the 1970s, under Nixon’s pressure, Burns sharply cut rates, ultimately leading the U.S. into severe inflation. This historical lesson has made many particularly wary of current political interference.

On December 14, Trump reiterated that he wants to see interest rates stay at 1% or lower within a year, setting a clear quantitative target for his “rate cut stress test.”

When asked whether the Fed Chair should consult the President on rate decisions, Trump broke with tradition: “I’ve always been successful, and I think my role should at least be to make suggestions.”

As the candidate list gradually becomes clearer, global markets are holding their breath, waiting for the final outcome of this power struggle.

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