Trump is considering announcing the next Federal Reserve chair candidate as early as this summer, far earlier than the traditional 3-4 month transition period.

Written by: Long Yue

Source: Wall Street Journal

Faced with the Federal Reserve's delay in lowering interest rates, Trump is getting restless. He is once again considering breaking with tradition and preparing to announce the next Federal Reserve chair candidate early, attempting to use a "shadow chair" strategy to pressure current chair Powell to accelerate the rate-cutting process.

According to the Wall Street Journal, Trump is considering announcing a successor to Powell as early as this summer or fall, far earlier than the traditional 3-4 month transition period. Insiders reveal that Trump is increasingly dissatisfied with the Fed's cautious stance on rate cuts and hopes that by announcing a successor in advance, the "shadow chair" can begin to influence market expectations and the direction of monetary policy before Powell's term ends.

Insiders have indicated that in recent weeks, Trump has been contemplating selecting and announcing Powell's successor before September or October, and his anger towards Powell may lead him to announce a successor earlier this summer. The new Federal Reserve chair will not take office until May next year.

Trump hinted at an accelerated process during a NATO summit press conference:

"I know who I will choose from 3-4 people. Fortunately, he will be leaving soon because I think he is terrible."

However, the Fed's policy is set by a committee of 12 decision-makers, and Trump cannot appoint a majority of members unless current governors leave early. This means the new chair must have the ability to persuade a broader committee. Announcing a successor early also carries risks. The candidate may find themselves in an awkward position of publicly criticizing future colleagues or losing credibility if the market views them as a "sycophant."

Candidates Emerge

As mentioned in a previous Wall Street Journal article, major candidates include former Fed governor Warsh, Director of the National Economic Council Hassett, current Fed governor Waller, and U.S. Treasury Secretary Mnuchin:

Waller, one of the officials nominated by Trump during his first term, stated in an interview with CNBC last Friday that he might support a rate cut next month due to concerns about an overly weak labor market.

In the past two months, one of the popular candidates for the next Fed chair, former Fed governor Warsh, has given multiple speeches, stating that the Fed must take responsibility for these attacks. "I see the media excitedly reporting how politicians are ruthless towards the Fed, and I just want to say: Grow up! Be tough."

Powell's Response

Facing political pressure, Powell reiterated the Fed's independence during a Senate hearing on Wednesday: "If we make a mistake here, people will pay the price for a long time." He stated that a rate cut this year is possible, but "we will take a cautious approach."

Powell's term as Fed chair ends in May next year, but his term as a governor does not expire until 2028, meaning he can choose to continue serving as a governor for another year and a half after stepping down as chair. Powell stated during a congressional hearing on Tuesday that he is focused solely on "keeping the economy strong and inflation under control during the remainder of his time at the Fed."

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