As regime change looms at the Fed, one candidate emerges as frontrunner for chair

President Donald Trump knows who he’s going to pick as the next Federal Reserve chair, but isn’t saying yet. The prediction markets have made up their minds, but even the frontrunners are hesitant.

While that part of the mystery appears set to be clarified in the coming weeks, it is much less certain what kind of environment the new central bank leader will face at a potential crossroads for the US economy.

National Economic Council Director Kevin Hassett has been labeled the clear favorite, boosted by a Bloomberg News report last week that disrupted a five-person race to succeed current Chairman Jerome Powell, whose term ends in May.

Asked about the situation Sunday, Trump told reporters aboard Air Force One, “I know who I’m going to pick, yes. We’ll announce it.” Additionally, when asked about Hassett, he said with a smile, “I’m not telling you, we’ll announce it.”

The candidate himself made the rounds on the weekend talk circuit, while also avoiding questions about his prospects. Hassett is part of a field that also includes current governors Christopher Waller and Michelle Bowman, former Governor Kevin Wersh and BlackRock fixed income chief Rick Ryder.

“I’m really honored to join a group of great candidates,” Hassett said Sunday on CBS’s “Face the Nation.” He noted that markets had reacted positively to reports of his emergence as the favorite, saying that Americans “can expect President Trump to elect someone who will help them, you know, have easier access to cheaper car loans and mortgages at lower rates.”

Shortly before that, on Fox News, Hassett had said only, “If he picks me, I’ll be happy to serve.”

The predictions market has been running rampant in recent days, giving Hassett a strong chance of getting the job. As of Monday afternoon, Kalshi traders gave the probability at 79%, while PredictIt gave the probability at 75% and Polymarket put it at only 63%, with “no announcement until Christmas” having the second highest probability at 22%, easily topping any of the other four finalists.

Whoever is actually selected will take charge of a Fed that is currently divided between officials who think additional interest rate cuts are necessary to address potential labor market distress and those who worry that inflation remains a threat that would be exacerbated by further easing of monetary policy.

For the next rates decision on Dec. 10, futures market traders are predicting an 87.6% chance of a cut in a trade that has been highly volatile in recent weeks.

Trump and other administration officials have been vocal about their preference for very low rates, and the president has said it is a litmus test for the next chair. In 2026, the rotating membership of regional chairs who get votes on the Federal Open Market Committee will have a hawkish tilt, meaning a priority on fighting inflation and keeping rates stable.

But the coming Fed arrangement will be about much more than rates.

In a CNBC interview last week, Treasury Secretary Scott Besant, who is leading the search for a Fed chair, said he is in favor of rethinking the Fed’s mission.

“We’ve reached the point where monetary policy has become very complex, and it’s much more than just cutting rates,” he said. “I think we need to simplify things a little bit.”

In particular, Besant highlighted the role of regional presidents.

Although they play a relatively limited role in setting rates and other issues related to monetary policy – ​​at least compared to the Chairman and the Board of Governors, public comments from local leaders can at times influence the market.

Besant said this is part of broader issues related to the Fed’s larger role in the economy and financial markets, primarily since the financial crisis when the central bank played a key role in implementing programs to pull the economy out of its worst downturn since the Great Depression.

“I think it’s time for the Fed to step back into the background as before, calm things down and get to work for the American people, get monetary policy on a good path,” he said. “All these speeches from these bank presidents … are absolutely unnecessary. Why don’t they actually come out and talk about the issues that are meaningful to the American people instead of the short-term view of the next meeting?”

The consideration of regional chairpersons is important in the sense that they will come up for re-appointment in 2026. While local boards appoint presidents, they are subject to the approval of the Board of Governors. On one issue Besant also commented that many Presidents are not from the districts they represent.

Mohammed El-Erian, Allianz’s chief economic adviser, praised Besant’s idea.

“We don’t need play-by-play feds,” El-Erian said on CNBC Monday morning. “We need the Fed to calm it down. We need the Fed to step back and take a bigger, more forward-looking view. And we need reforms. We desperately need reforms. And I think all five on the short list are committed to reforming that institution, which is critical not only to America but to the global economy.”

Correction: The Federal Reserve’s next policy meeting is Dec. 9-10, with a rate decision to be released the day after. An earlier version of this story misstated the date.