Fed Chair Race Takes Sudden Turn: Hasset Hints at Exit, Wosh's Win Rate Soars

Source: Jin10 Data

White House economic advisor Kevin Hassett stated that Trump is very likely to keep him in his current position, which would remove him from the race for the next Federal Reserve Chair.

“From the beginning, he and I discussed whether I would be better off in the White House West Wing or at the Federal Reserve,” Hassett said on Fox News’ “Sunday Briefing.” “I don’t think he has made a final decision on this yet.”

Last week, Trump expressed reservations about nominating Hassett to succeed current Fed Chair Powell. During an event at the White House, he told the Director of the National Economic Council: “Honestly, I actually hope you stay in your current position.”

Hassett was once considered one of the top contenders along with Federal Reserve Board member Christopher Waller, former Board member Kevin Warsh, and BlackRock executive Rick Rieder. According to sources, this is now viewed as a four-person race, with Rieder’s candidacy gaining recent momentum as some believe he might have a better chance of securing Senate confirmation.

After Trump’s speech, traders on the prediction market site Kalshi increased the likelihood of Warsh getting the job to 60%, while Hassett and Waller were only at 16% and 14%, respectively. Traders on Polymarket also showed similar dynamics, with Warsh supported at 60%, Hassett at 15%, and Waller at 13%. Previously, Warsh and Hassett had been neck and neck in winning probabilities.

Krishna Guha, head of Global Policy and Central Bank Strategy at Evercore ISI, wrote: “It’s uncertain whether this is a clear signal — the President has sent various signals at different times and seems to enjoy the drama of ‘The Apprentice’ season — but it appears that this former Fed official is now the clear front-runner.”

A criminal investigation into the Federal Reserve and its Chair Powell, concerning the renovation of the central bank’s headquarters, has added new uncertainty to the Fed Chair selection process and triggered a rally.

Powell accused the Justice Department of launching the investigation to pressure the Fed into cutting rates. Key lawmakers, including Senate Banking Committee member Thom Tillis, warned that scrutiny of Trump’s nominees would become more rigorous.

Although Trump claimed to be “completely unaware” of the investigation, the Justice Department’s move, combined with Trump’s relentless pressure on Powell and the Fed to lower interest rates, has reignited broad market concerns about the central bank’s independence from political interference.

Axios reported on January 12 that Treasury Secretary Janet Yellen had warned Trump that the investigation had caused confusion and could be detrimental to financial markets.

While Yellen declined to comment on Axios’s report during an NBC “Meet the Press” interview, she cited last week’s US Treasury bond auction as evidence, saying “the market is moving beyond this issue.”

Although US Treasury markets showed little change last week, yields on Treasuries declined on Tuesday and Wednesday.

Yellen told NBC she was not worried that the Senate might block Trump’s eventual nominee to lead the Fed.

“I think we will continue to move forward,” she said. “I believe we might hear soon from the Banking Committee about what they want to see.”

Yellen told NBC News that the Senate would be “very satisfied” with any of the four “great” candidates Trump is considering to replace Powell. She called for oversight of the Fed and noted that the institution can print money on its own.

Powell’s term as Fed Chair will end on May 15. The selection process is led by Yellen.

“There are many excellent candidates, and the President is very likely to make the right decision, believing that this (White House) is the best place for me right now,” Hassett said last Sunday about the White House.

He said he was “flattered and grateful” for Trump’s comments about his future, calling the President “a really good person.”

Trump has stated he will appoint Powell’s successor this month but has not provided a specific date.