Big Changes Coming to the Fed—And Interest Rates—Next Year If This Frontrunner Gets Powell’s Job

Kevin Hassett, the reported frontrunner to take over as Federal Reserve chair in May, has a recent track record of advocating for the central bank lowering interest rates.

Hassett is the leading candidate to replace Federal Reserve Chair Jerome Powell when his term ends in May, Bloomberg reported this week. President Donald Trump is expected to announce his choice for the Fed chair nominee in the coming weeks.

Hassett is a top economic advisor to Trump, currently serving as Director of the National Economic Council. In recent media interviews, Hassett has criticized the current leadership of the Fed for not lowering interest rates quickly enough, aligning with his current boss’s views.

The central bank has already cut interest rates by a quarter-point at each of its last two meetings, and is now expected to do so again at its next meeting in December. However, the 12 officials who vote on policy are divided about whether to keep rates higher for longer to push down inflation that’s still running above the Fed’s target of a 2% annual rate, or to lower them to help boost the ailing job market.

The Fed has not been cutting rates fast enough for Trump, who has repeatedly threatened to fire Powell before his term expires, and has said his pick for Fed chair would be someone who would lower rates. Going by Hassett’s recent public comments, it is clear where he stands on the debate.

In an interview with Yahoo Finance this week, Hassett said the bank should be cutting interest rates despite an uptick in job growth in September, accused Powell of having “partisan” motivations for his monetary policy decisions, and said the next Fed chair needed to “clean house.”

In other recent interviews, he has fiercely defended Trump’s economic policies, including his controversial tariffs, and said he believes inflation will fall to around 1% next year while economic growth surges.

Lower interest rates would reduce borrowing costs on short-term loans and potentially provide a boost to the economy. But some economists and Fed officials worry that cutting too steeply could boost inflation, especially with Trump’s tariffs already pushing up prices.

Hassett Would Take Someone’s Place, But Whose?

Hassett’s nomination would raise several questions about the future of the central bank and its independence from White House control. He would still have to be confirmed by the Senate to take the post.

It’s also unclear who on the 12-member FOMC he would replace, since, unlike other candidates Michelle Bowman and Christopher Waller, he is not on the board already. Although Powell would no longer chair the Fed’s board of governors, his term as a rank-and-file board member does not expire until 2028, and he could choose to stay on. Powell has declined to answer questions about whether he will step down in May.

A seat could also open up for Hassett if the Supreme Court allows Trump to remove sitting board member Lisa Cook. A third possibility is that he could take the place of fellow Trump nominee and rate-cut advocate Stephen Miran, whose term ends in January 2026.

There is also the possibility of an unprecedented power split, as reported by Fortune, in which Powell could remain the chair of the FOMC while Hassett serves as chair of the Fed’s board of governors. Those are technically two different positions, and the FOMC chair is voted on by the board itself, which has traditionally selected the Fed board chair as its own chair, but isn’t required to by law.