President Donald Trump has made up his mind. In an interview with The New York Times this week, the president confirmed that he has finalized his selection for the next Chair of the Federal Reserve—the most powerful economic policy position in the world. While he stopped short of naming his choice, Trump promised an announcement "sometime in January."

The stakes could hardly be higher. The Federal Reserve Chair controls the levers of monetary policy that affect everything from mortgage rates to stock prices to the value of every dollar in Americans' pockets. Jerome Powell's term expires in May, and his replacement will inherit an economy in transition—inflation tamed but not vanquished, employment strong but softening, and financial markets trading at historic valuations.

The 'Two Kevins' Emerge

While Trump has kept his cards close, prediction markets and Washington insiders have narrowed the field to two front-runners, both named Kevin. The president himself has fueled this speculation, recently referring to the pair as "both great" options.

Kevin Hassett: The Loyalist

Kevin Hassett, currently serving as Director of the National Economic Council, represents the loyalist choice. A longtime Trump ally who served as Chair of the Council of Economic Advisers during the first term, Hassett has been a vocal critic of the Fed's cautious approach to rate cuts.

Hassett argues that strong productivity growth in the economy gives the Fed room to cut rates more aggressively without reigniting inflation. This view aligns closely with Trump's own publicly stated preferences for lower interest rates.

"My sense is that productivity is on fire. And if productivity is on fire, then we have a lot of room for the Fed to cut rates without creating inflation."

— Kevin Hassett, National Economic Council Director

For Hassett, the Fed Chair position would represent the capstone of a career spent advocating for supply-side economics. His critics worry that his close alignment with Trump could compromise the Fed's independence—but supporters counter that the central bank has already been politicized and needs leadership willing to challenge the status quo.

Kevin Warsh: The Wall Street Choice

Kevin Warsh represents a more traditional pick. A former Fed governor who served from 2006 to 2011, Warsh has the institutional experience and Wall Street credibility that financial markets tend to favor.

Warsh was reportedly Trump's first choice for Fed Chair before his second term, losing out to Powell's reappointment. His return to the conversation suggests the president values having a candidate who can navigate the complex world of central banking while still pursuing an agenda of lower rates.

Unlike Hassett, Warsh has maintained some distance from Trump's most aggressive economic positions. He's expressed support for Fed independence while also acknowledging that the central bank may have been too slow to recognize inflation's decline. For markets worried about policy instability, Warsh offers a middle path.

The Interest Rate Litmus Test

One thing is clear from Trump's public comments: he expects his Fed Chair to cut rates. The president has described immediately lowering interest rates as a "litmus test" for whoever leads the central bank.

This creates an interesting dilemma. The Fed has already cut rates three times in 2025, bringing the federal funds rate to the 3.5% to 3.75% range. Minneapolis Fed President Neel Kashkari said this week that he believes rates are "pretty close to neutral"—the level that neither stimulates nor restrains the economy.

But Trump administration officials see room for more aggressive action. Treasury nominee Stephen Miran has argued that the Fed should cut by more than a percentage point in 2026, calling current monetary policy "restraining" to economic growth.

What Markets Expect

Bond markets are currently pricing in modest expectations for Fed easing:

  • January rate cut probability: 16%
  • April rate cut probability: 45%
  • Total 2026 rate cuts expected: Two quarter-point reductions

A Fed Chair known to favor aggressive easing could shift these expectations dramatically, affecting everything from Treasury yields to mortgage rates to the dollar's value.

The Legal Wild Card

Adding uncertainty to the transition is a Supreme Court case scheduled for January 21. The court will hear arguments on whether Trump has the authority to remove Fed Governor Lisa Cook—a case with implications for whether the president could fire Powell outright rather than waiting for his term to expire.

Trump has said he would "love to fire" Powell, while also stating that Powell "should resign." If the Supreme Court rules that the president has authority to remove Fed governors, it could fundamentally reshape the relationship between the executive branch and the central bank.

"The Fed Chair nomination is important, but the Supreme Court case may be even more consequential. If Trump can fire Fed governors at will, the central bank's independence becomes a fiction."

— Former Fed official

The Confirmation Challenge

Whoever Trump nominates will face Senate confirmation, though the Republican majority makes approval likely. The more significant question is how financial markets will react to the nomination.

A Hassett nomination could trigger volatility as investors price in the possibility of more aggressive rate cuts and closer White House coordination with monetary policy. A Warsh nomination would likely be received more calmly, given his established credibility with the financial establishment.

What Investors Should Watch

Several indicators will reveal how markets interpret the nomination:

  • Treasury yields: A spike in long-term yields could signal concerns about inflation or debt sustainability under new Fed leadership
  • Dollar strength: Currency markets are particularly sensitive to Fed policy expectations
  • Gold prices: The traditional haven asset often rises when central bank credibility is questioned
  • Bank stocks: Financial institutions benefit from a steep yield curve, which aggressive rate cuts could flatten

The Other Contenders

While the "Two Kevins" dominate speculation, several other candidates remain in the mix:

Chris Waller: The current Fed governor is seen as a dark horse candidate. A respected economist, Waller has been more dovish than some colleagues and might appeal to Trump's preference for lower rates while maintaining institutional continuity.

Michelle Bowman: Another sitting Fed governor, Bowman has private sector banking experience and has occasionally dissented from the Fed's consensus on rate policy.

Rick Rieder: BlackRock's global fixed income chief has been mentioned as an unconventional pick. His private sector experience would bring a different perspective to the central bank.

The Bottom Line

Trump's Fed Chair selection will shape American economic policy for at least four years—and potentially much longer. The Federal Reserve's decisions affect every American who borrows money, holds savings, or participates in financial markets.

Both Kevin Hassett and Kevin Warsh would likely pursue a more accommodative monetary policy than Powell. But the differences in style, credibility, and approach to Fed independence could produce meaningfully different outcomes for markets and the economy.

With the announcement expected this month, investors don't have long to wait. But the consequences of Trump's decision will reverberate for years to come. The most powerful economic job in America is about to change hands, and the "Two Kevins" stand at the threshold.