Trump-Backed Hassett's Nomination Threatens Fed Independence

Kevin Hassett, the director of the Trump White House's National Economic Council, has emerged as the leading candidate to replace Federal Reserve Chair Jerome Powell, with prediction markets assigning him a 77% probability of securing the nomination as of late November 2025. If confirmed, Hassett would inherit a central bank grappling with divergent policy views and a president who has repeatedly criticized the Fed's inflation-fighting measures. His potential appointment has sparked concerns about the independence of the U.S. central bank, with critics arguing that a Trump-aligned chair could undermine the Fed's nonpartisan credibility.

Hassett, 63, brings a deep Washington pedigree to the discussion. A former senior economist at the Fed, he served as chair of the Council of Economic Advisers during Trump's first term and has long advocated for lower interest rates, aligning with the president's public demands. He also worked as an economic adviser for Republican figures such as George W. Bush, John McCain, and Mitt Romney, a fact he shrugged off during a recent interview, stating, "I guess there have been a lot of people who have come into government with worse backgrounds." His academic credentials include a doctorate in economics from the University of Pennsylvania, and his career has been marked by a blend of academic, think tank, and government roles.

The potential nomination has raised eyebrows among economists. Deutsche Bank warned in June 2025 that Fed chairs from outside the institution face challenges in persuading the policy committee to adopt dovish stances, as their ties to political agendas could "raise questions about the Fed's independence." Trump's frequent calls for rate cuts-despite recent data showing inflation remains stubbornly above 2%-have further fueled skepticism. Hassett has echoed these sentiments, noting that inflation is "way down" and suggesting that the jobs data carries "political bias."

Market reactions to his candidacy have been mixed. The 10-year Treasury yield dipped below 4% following reports of his frontrunner status, signaling investor anticipation of aggressive rate cuts. Paul Ashworth of Capital Economics argued that Hassett's academic background and moderate Republican ties might mitigate concerns about independence, though he cautioned that the chair would likely "pay lip service to Trump's demands" without fully embracing them. Meanwhile, Bank of America analysts warned that Fed independence risks remain underpriced, potentially manifesting in a weaker dollar and higher long-term Treasury yields.

Hassett's nomination would also reshape the Fed's policy trajectory. The central bank is currently split between officials advocating for rate cuts to avert a labor market slowdown and those fearing inflation could resurge. With regional Fed presidents holding a hawkish tilt in 2026, a dovish chair like Hassett could accelerate rate reductions. Treasury Secretary Scott Bessent, leading the search, emphasized the need to simplify the Fed's mission, suggesting the institution has become overly complex in managing monetary policy.

Trump is expected to announce his decision by December 25, with the transition to a new chair set for May 2026. Hassett's confirmation would likely face Senate approval, though his moderate credentials and prior Fed experience could ease the process. However, the broader implications for the Fed's institutional integrity remain a contentious topic, with critics warning that politicizing monetary policy could erode public trust and global confidence in U.S. financial markets.