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 Donald 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. The pushback could help explain why interviews with candidates were cancelled in early December and then, at least for Warsh, rescheduled for last week.
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. The comments sent Hassett’s odds diving on the Kalshi prediction markets.
“I think the two Kevins are great,” said Trump.
Hassett remains the favorite on Kalshi Monday with a 51% chance, although that’s down from a high above 80% earlier this month. Warsh’s odds are currently 44%, up from around 11% to start December.
The pushback has taken more of the form of promoting Warsh, rather than criticizing Hassett. On Thursday at a JPMorgan event, CEO Jamie Dimon spoke favorably of both Hassett and Warsh, but made some comments that made those in the audience believe that Dimon favored the former Fed governor.
Bloomberg News reported at the end of November that Hassett had emerged as the frontrunner to replace Powell, whose term ends in May.
But 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.
When asked if the president’s view would carry the same weight as a voting central bank member, Hassett said: “No, no, he would have no weight. It’s just his opinion matters if it’s good, you know, if it’s based on data.”
