After dissenting the latest Fed decision, Waller could be the aggressive Fed chair Trump wants
While the process continues to find a replacement for a soon-to-be-resigning Federal Reserve governor, clarity on who will eventually take over for Fed chairman Jerome Powell may be coming into focus.
According to a report by Bloomberg, Fed governor Christopher Waller may be emerging as the front-runner for the top post at the central bank.
Waller, a Trump appointee during his first term, joined the board to fill an unexpired term on Dec. 18, 2020. His term runs through Jan. 31, 2030.
During the most recent meeting of the Federal Open Market Committee (FOMC), Waller joined Michelle Bowman in making official dissents to the decision to hold rates steady. It was the first time since 1993 that there were two dissents to a Fed decision.
Powell’s term runs through May 2026, unless he leaves or is removed before that date. In addition to finding an eventual replacement for Powell, the Trump administration is working to replace Adriana Kugler, who will resign from the Fed board effective Friday.
Calling for cuts
Waller has been critical of the Fed’s desire to hold rates steady throughout 2025. With the Trump administration calling for aggressive rate cuts, Waller’s elevation to chair could signal a Federal Reserve more willing to cut rates in 2026.
In his official dissent, Waller said he thought tariffs implemented by the administration were “one-off increases” and would “not cause inflation beyond a temporary increase.”
He also discussed potential weaknesses in the labor market, something that started to show up in last week’s jobs report.
“While the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased,” Waller said in his dissent. “With underlying inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate.”
Julie Harris, broker owner of Harris Mortgages of Idaho, says that with so many people waiting for a shift, a quarter-point rate cut would provide the "hope" needed to encourage buyers and sellers to step out.https://t.co/jgoJtpPtyT
— Mortgage Professional America Magazine (@MPAMagazineUS) August 4, 2025
He also stated that he thought the current approach of the board was overly cautious, and it wasn’t reflecting potential risks. He felt that even though the effects of the tariffs were still unknown, the labor market might falter before tariff impacts are felt.
“The price effects from tariffs have been small so far, and since we will likely not get clarity on tariff levels or their ultimate impact on the economy over the course of the next several months, it is possible that the labor market falters before that clarity is obtained—if it ever is obtained,” he said. “When labor markets turn, they often turn fast. If we find ourselves needing to support the economy, waiting may unduly delay moving toward appropriate policy.”
Other candidates
While Waller may be emerging as a front-runner for the Fed chair, there are other candidates to keep an eye on.
In an interview with CNBC, Trump spoke highly of both Kevin Hassett, director of the National Economic Council, and former Fed governor Kevin Warsh.
According to Polymarket, which is an American crypto-based prediction market, Waller is listed as the betting favorite at 35%. The second betting favorite is that there will be no announcement on Powell’s replacement at 28%. Hassett is third at 19%, while Warsh is fourth at 11%. No other candidate has more than a 1% chance.
The opening on the Fed board may be the opportunity Trump needs to get either Warsh or Hassett on the board before the announcement of a new Fed chair. Polymarket gives Warsh a 26% chance of replacing Kugler and Hassett a 19% chance. Judy Shelton, a former Trump economic advisor, is the bettors’ third choice at 17%.
One name Trump would like to have in the running is Treasury Secretary Scott Bessent, but he has taken himself out of the running.
Announcing Powell’s replacement this far in advance of his term ending could create a “shadow chair” scenario, where the future Fed chair could put pressure on Powell until next May.
According to CME FedWatch, which tracks the probability of a change to the Fed rate based on the 30-day Fed Funds future prices, there is a 91.2% chance of a 25-basis-point rate cut in September. Currently, there is a 60.5% chance of another 25 bps cut in October.
FedWatch currently predicts rate cuts at all three of the FOMC meetings for the rest of 2025.
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