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Powell will be Fed chair until May 15, 2026. Then what?

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Federal Reserve Chairman Jerome Powell has a big job to do this week. I suspect we will see the dot plot shift to 50 bps from 75 bps in cuts but he will maintain the same rhetoric as he has for the past couple months, leaving June in play if inflation slips or growth data weakens.

Given that Powell still has more than two years left in his term, it’s too soon to start speculating about the implications of his successor but the WSJ had an interesting article today. It highlights three names floated by Trump advisors: Kevin Warsh, Kevin Hassett and Arthur Laffer.

Kevin Warsh is well-known in Fed circles as a former governor. He was short-listed for Powell’s job and interviewed with Trump but was ultimately passed over. Speaking of the interview, Wash was asked if the president appeared to understand the historical importance of the Fed’s independence from partisan political pressure, Warsh said: “This might be a good time for a no comment.”

He was directly asked about what he would do with interest rates.

“If you think it was a subject upon which he delicately danced around, then you’d be mistaken. It was certainly top of mind to the president,” Warsh said about Trump’s questioning on interest-rate policy. “The president has a view about asset prices and stock markets. He has a view based on his long history in his prior life as a developer and real estate mogul of the role of interest rates.”

As for what it meant, Warsh said he believed Jerome Powell’s “high character is going to be tested.”

Given his hawkishness and prior brush with Trump, I’d say he’s unlikely to get the job but he does have friends in high places as he’s married to the heir to the Estee Lauder fortune.

Kevin Hasssett would be more familiar to Trump as he Trump’s Kevin Hassett chairman of the Council of Economic Advisers. He hasn’t been afraid to politicize the Fed, as this recent interview highlights.

Finally, Arthur Laffer appeared to lobby for himself in a meeting with Trump last week. He’s been a long time advisor to Trump on economic issues and was a Reagan-era advisor but is 83 years old. He’s best known for the theory on the Laffer Curve, which is the level of tax rates that would maximize government revenue.

The report also notes that others weighed by the group included former World Bank Group President David Malpass and Judy Shelton but they didn’t get enough support.

On the other side, I would wager that the two top names would be Lael Brainard and Auston Goolsbee, who are both dovish-leaning White House favourites.

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