US President Donald Trump is entering the decisive stage of choosing the next Federal Reserve chair, with current White House economic adviser Kevin Hassett still leading the pack but now facing direct competition in final interviews.
According to senior administration officials, Trump and Treasury Secretary Scott Bessent will meet former Fed governor Kevin Warsh this week, while at least one more candidate will be interviewed next week. The shortlist has been trimmed to four: Hassett, Warsh, current Fed governor Christopher Waller, and BlackRock fixed-income chief Rick Rieder. Fed governor Michelle Bowman is also understood to remain in contention.
A decision is expected in early January, ahead of current chair Jerome Powell’s term ending in May 2026.
Hassett, who heads Trump’s National Economic Council, has emerged as the clear frontrunner in recent weeks. However, the decision to hold additional interviews indicates that the outcome is not yet set in stone. Some officials have even floated the idea of Hassett serving only a shortened term, potentially paving the way for Bessent to take the role later in Trump’s second term.
Bond investors have expressed private concern to the Treasury that Hassett is seen as too close to the president and might push for aggressive rate cuts, risking a resurgence of inflation and instability in the $30 trillion Treasury market. In response, Hassett has recently stressed the importance of Fed independence and data-driven decisions.
Trump has repeatedly criticised Powell for not cutting rates fast enough and has publicly called for the policy rate to drop toward 1%. The Fed is widely expected to deliver a 25-basis-point cut this Wednesday, bringing the target range to 3.50–3.75%.
For Australian investors, the identity of the next Fed chair matters enormously. A more dovish leader could further weaken the US dollar and keep downward pressure on the Australian dollar, while also influencing the RBA’s rate path in 2026. Any hint of politicisation at the world’s most powerful central bank could also raise long-term risk premiums across global fixed-income markets.
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