Trump's Fed Pick Likely to Drive Dovish Policy and Weaken Dollar

If U.S. President Donald Trump selects Kevin Hassett or David Malpass to succeed Larry Kudlow as a Federal Reserve Board member, the U.S. dollar could weaken due to their dovish monetary policy stance. This is according to recent analysis highlighting that both Hassett and Malpass are viewed as more accommodative compared to another leading candidate, Kevin Warsh. Trump is expected to announce the replacement for Kudlow by the end of the week, with the individual also likely to serve as the next Federal Reserve Chair following Jerome Powell. The final four candidates under consideration are Hassett, Malpass, Warsh, and current Fed Governor Christopher Waller [1].

The decision is expected to shape the Federal Reserve’s policy direction in the coming months. Analysts suggest that regardless of who is chosen to replace Kudlow, the new appointee is likely to advocate for a rate cut exceeding 25 basis points during the September meeting. This move would reflect a broader shift toward easing monetary policy, which could weaken the dollar’s value in the short term. Such a shift is in contrast to a more hawkish approach that would support a stronger U.S. dollar [1].

The potential nomination of Hassett or Malpass has drawn attention due to their historically dovish positions on interest rates and economic growth. If appointed, either could signal a policy environment more favorable to economic stimulus and accommodative monetary conditions, which may reduce the dollar’s appeal to foreign investors. The Fed’s policy pivot, if confirmed, could also influence global capital flows and inflation expectations [1].

Trump’s decision highlights the political nature of the Federal Reserve Chair appointment process, as the President’s choice will have lasting implications for U.S. monetary policy and global markets. The eventual nominee will face pressure to balance economic recovery with inflation control, while also managing expectations for future rate cuts [1].

Source:

[1] BlockBeats, Analysis: If Haslet or Malpas were to take over as Federal Reserve Board members, the dollar would fall, https://www.theblockbeats.info/en/flash/306155