2025 Fed Chair Race Update: Candidates Narrowed Amid Rate Cut Pressures

This analysis is based on the CNBC segment [1] and contemporaneous news sources. On December 15, 2025, CNBC’s Steve Liesman discussed updates to the race to replace Fed Chair Jerome Powell (term ends May 2026). President Trump narrowed his nominee shortlist to two candidates: former Fed Governor Kevin Warsh (Trump’s current favorite) and National Economic Council Director Kevin Hassett [2][3][4]. Trump’s core priority for the next Fed chair is sharp interest rate cuts—calling for a reduction from the then-current ~3.6% to 1% or lower, a view rejected by most economists [3][4]. To address market concerns about political interference, Hassett stated he would present Trump’s views to the FOMC but the Fed would retain independence to reject them [1][3].

The race unfolds amid a delicate economic backdrop: the Fed recently cut rates by 25 basis points (December 10, 2025) to 3.50–3.75% [5], and inflation remains stubbornly above the Fed’s 2% target. On December 15, U.S. stock futures firmed due to expectations of a dovish Fed chair, as rate cuts reduce corporate borrowing costs and support asset prices [2].

1. Candidate Backgrounds
   : Kevin Warsh brings direct Fed experience (ex-governor, Hoover Institution fellow), while Kevin Hassett is a long-serving Trump economic advisor—reflecting a balance between institutional expertise and White House alignment.
2. Election-Influenced Policy
   : Trump’s push for deep rate cuts is tied to his 2026 election priorities, creating tension between short-term economic growth and long-term inflation stability.
3. Independence as a Market Signal
   : Hassett’s explicit emphasis on Fed independence is critical to preserving central bank credibility; without this assurance, political interference could destabilize long-term interest rates and investor confidence.

• Risks
  :
  • Political interference in Fed monetary policy could undermine the central bank’s credibility, potentially leading to sustained high inflation and market volatility.
  • Premature rate cuts (not justified by economic fundamentals) risk reigniting inflation above the Fed’s 2% target, eroding purchasing power.
• Opportunities
  :
  • Dovish monetary policy could support corporate borrowing, consumer spending, and asset prices if aligned with improving economic conditions.
  • A new Fed chair may bring fresh perspectives to balancing inflation control and economic growth, though the nominee’s stance will be rigorously tested during Senate confirmation.

• Fed Chair Jerome Powell’s term expires in May 2026; Trump plans to formalize his nomination in early 2026 [1].
• Current Fed target rate range: 3.50–3.75% (following the December 10, 2025, 25bp cut) [5].
• Narrowed candidates: Kevin Warsh (ex-Fed governor, Hoover Institution) and Kevin Hassett (NEC Director) [2][3][4].
• Market reaction: U.S. stock futures strengthened on December 15, 2025, due to expectations of dovish Fed leadership [2].