Trump to Nominate Jerome Powell’s Successor Soon

By Lewis Krauskopf

NEW YORK (Reuters) – U.S. President Donald Trump has indicated he soon plans to nominate a successor for Jerome Powell, whose term as Federal Reserve chair ends in nearly a year. Investors worry this could be risky for markets.

Trump has openly criticized Powell and the Fed for maintaining interest rates since he began his second term in January. Although he backed off threats to fire Powell, he announced earlier this month that a decision regarding the next Fed chair would be made soon.

The announcement, made well before Powell’s term ends in May 2026, may cause market unease, according to investors. The risk of a “shadow” Fed chair with opposing views on monetary policy could lead to confusion, and any nominee perceived as politically influenced would alarm Wall Street, as an independent Fed is seen as essential for proper functioning.

Eric Winograd, AllianceBernstein’s chief U.S. economist, noted: “Whomever is appointed, the key thing to monitor is whether they are perceived as being a political appointee.”

While the Fed chair plays a significant role in setting U.S. monetary policy, they are only one of 18 members on the monetary policymaking committee and must foster consensus.

Callie Cox, chief market strategist at Ritholtz Wealth Management, stated that markets seek a Fed chair primarily focused on economic balance and the Fed’s dual mandate. She emphasized, “Fed independence is the golden rule of markets.”

An unconventional choice could introduce uncertainty. Jason Draho from UBS Global Wealth Management warned, “It’s a risk that exists if people are too complacent about how this could all play out.”

There are currently no open positions that Trump could fill before January when Adriana Kugler’s term ends. Top candidates per prediction markets include White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and Treasury Secretary Scott Bessent. Christopher Waller, a current Fed Governor, is also speculated to be a contender.

Trump has consistently criticized Powell, referring to him as a „numbskull“ after the Fed kept rates steady despite higher inflation and unemployment risks. A new chair would need Senate confirmation, potentially delaying the process.

Investors indicate that naming a shadow Fed chair might not be well-received, as it suggests conflicting monetary policy guidance. Analysts like Alex Grassino from Manulife Investment Management noted that having a well-known candidate could improve communication style familiarity for markets.

Felix Vezina-Poirier from BCA Research advised that the best market reaction to any nomination may be minimal or a reduction in long-term yields, suggesting that markets are adequately processing the Fed candidate’s implications.

Some investors doubt Trump will rush to replace Powell and may wait until closer to the chair’s term’s conclusion.

“If I were betting, I’d bet other,” Winograd concluded, “I’d bet the field.”