Trump Shifts on Fed Pick as Hassett Odds Fade: Who Will Replace Powell?

President Donald Trump has indicated he will not nominate Kevin Hassett as the next Federal Reserve chair, shifting focus to other candidates in the running. Trump made the remarks during a White House event, where he stated he would prefer to keep Hassett in his current role as director of the National Economic Council. This statement significantly reduced Hassett's odds of securing the Fed chair position, according to prediction markets.

The shift has increased attention on Kevin Warsh, a former Federal Reserve governor, as a leading contender for the role. Warsh's chances surged on prediction markets after Trump hinted at Hassett staying in his current position. Kalshi, for example, reduced Hassett's odds to 15% from 35% on the same day.

Meanwhile, political pressure on the Federal Reserve has intensified amid a criminal investigation into current Fed Chair Jerome Powell. The investigation, launched by the U.S. Department of Justice, has raised concerns among lawmakers and central bankers globally. Several Republican senators, including Thom Tillis and Lisa Murkowski, have expressed support for blocking any Fed nomination until the investigation into Powell concludes.

Why Did This Happen?

Trump's remarks came amid a broader discussion about the Federal Reserve's independence. The president has been vocal in his criticism of the Fed for not lowering interest rates more aggressively, often challenging the central bank's decisions in public. The ongoing investigation into Powell has further complicated the nomination process. Some analysts suggest that Hassett's close ties to Trump may make it difficult for him to gain Senate confirmation.

Warsh, a more moderate figure, is seen as a safer option by some in the Senate. His experience on the Fed board and his reputation for advocating low-interest-rate policies have positioned him as a likely candidate.

How Did Markets React?

Financial markets reacted to the news, with gold and silver prices initially dropping after Trump's comments. Gold futures fell by as much as 1.7% as investors reassessed their positions. The dollar, meanwhile, pared losses, and Treasury yields advanced, reflecting a shift in risk appetite.

The move also had an impact on prediction markets, where investors quickly adjusted their bets. Kevin Warsh's odds of becoming the next Fed chair increased significantly, with Polymarket showing a surge of 75% in his favor. Crypto markets, in particular, appeared sensitive to the news, as traders recalibrated their positions based on the changing odds.

What Are Analysts Watching Next?

Analysts are closely monitoring how the political environment affects the Federal Reserve's policy-making. The Trump administration has already increased its influence within the Fed, with Trump appointee Stephen Miran voting for rate cuts at recent FOMC meetings. However, Miran's views remain an outlier and have not yet impacted broader policy decisions.

The Fed's ability to maintain its independence amid political pressure is a key concern. Global central bank leaders, including the heads of the European Central Bank and the Bank of England, have publicly supported Powell and stressed the importance of central bank independence. They warned that political interference could undermine financial and economic stability.

Investors are also watching for any changes in the Fed's rate path. Recent inflation data showed a slight decline, leading traders to increase their bets on a potential rate cut in April 2026. However, the timing of the Fed chair nomination remains a critical factor that could influence market expectations.

Looking Ahead

Trump has indicated that he will announce his Fed chair nominee within the next few weeks. Until then, uncertainty is likely to persist, affecting both financial and cryptocurrency markets. The outcome of the nomination process could have lasting implications for U.S. monetary policy and investor sentiment.

As the Fed chair search continues, the balance between political influence and institutional independence remains a central issue for both lawmakers and financial markets.