Trump's shortlist for Fed chair reveals diverging views on the path for interest rates
As United States president Donald Trump closes in on his pick for the next Federal Reserve chair, the finalists’ contrasting views on interest rate cuts have taken center stage.
With the central bank’s direction hanging in the balance, the five contenders—Christopher Waller, Michelle Bowman, Kevin Hassett, Kevin Warsh, and Rick Rieder—have each staked out distinct positions on whether the Fed should move quickly to lower rates or proceed with greater caution.
Inside the selection process
The field was trimmed from 11 to five following a series of interviews, some lasting up to two hours, according to senior Treasury officials.
The remaining candidates bring a mix of regulatory, policy, and market expertise. Bowman is recognized for her regulatory acumen, while Hassett’s background in economic policy stems from his White House tenure.
Warsh, who served during the financial crisis, is seen as a steady hand in turbulent times. Rieder, the only candidate without Fed experience, has won praise for his market insight at BlackRock.
Bessent, once rumored as a contender himself, dismissed speculation he might leave Treasury for the Fed chair, reiterating his focus on delivering a strong candidate list.
Policy direction in the spotlight
The Federal Open Market Committee is set to meet this week, with markets widely expecting another rate cut.
Waller, one of the finalists, has openly supported further interest rate reductions.
“I want to move towards cutting rates, but you’re not going to do it aggressively and fast, in case you make a big mistake on which way that things go,” Waller said.
“I’m still in the belief we need to cut rates, but we need to kind of be cautious about it.”
He pointed to a labor market that appears to be losing jobs, even as gross domestic product (GDP) growth remains strong and inflation stays above the Fed’s 2% target.
“Something’s got to give. Either the labor market rebounds to match the GDP growth, or that GDP growth is going to pull back. So whichever way that goes, it’s got to affect what you do with policy,” Waller said.
Bowman, who supported a smaller rate cut at the last meeting, has since warned that the Fed risks falling behind in supporting the labor market. “Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward,” she said.
Hassett, known for his dovish leanings during his time at the White House, has argued in past interviews for “proactive” rate cuts to bolster economic momentum.
Warsh, who served as a Fed governor from 2006 to 2011, was the youngest ever appointed to the board at age 35. He played a key role during the 2008 financial crisis, advocating for swift and decisive action to stabilize markets. Since leaving the Fed, Warsh has become a fellow at the Hoover Institution and a lecturer at Stanford.
Rieder, BlackRock’s chief investment officer of global fixed income, oversees the management of roughly $2.4 trillion in assets. With a career spanning Wall Street firms since 1987, Rieder is widely respected for his market insight and risk management expertise.
Implications for mortgage and housing
The Trump administration’s push for more aggressive rate cuts has raised questions about the Fed’s future direction.
Should Powell step down, Trump would have the opportunity to appoint a fourth governor, potentially reshaping the board’s policy outlook.
For the mortgage industry, the prospect of further rate cuts could mean lower borrowing costs and increased refinancing activity, but also heightened uncertainty as the central bank’s leadership and strategy remain in flux.
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