The most consequential economic appointment of President Donald Trump's second term is nearing a decision. With Federal Reserve Chair Jerome Powell's tenure set to expire in May 2026, Trump has indicated he will name his preferred successor by the end of January.

The stakes couldn't be higher. The Fed chair wields enormous influence over interest rates, employment, and inflation—factors that touch every American's financial life. Trump's choice will shape U.S. monetary policy well into the next decade.

The Five-Candidate Shortlist

Sources familiar with the selection process have identified five names under serious consideration:

Kevin Hassett

The current White House National Economic Council Director is seen by many as the frontrunner. Hassett served as chair of the Council of Economic Advisers during Trump's first term and has built strong relationships within the administration. His academic credentials include a Ph.D. from the University of Pennsylvania and extensive experience at the American Enterprise Institute.

Kevin Warsh

A former Fed governor who served from 2006 to 2011, Warsh has been on Trump's radar for years. He was reportedly a finalist for the Fed chair position in 2017 before Trump ultimately chose Powell. Warsh brings the advantage of institutional knowledge and Wall Street connections from his time at Morgan Stanley.

Christopher Waller

The current Fed governor, appointed during Trump's first term, is considered a monetary policy expert with hawkish-leaning views on inflation. His insider status could provide continuity during the transition.

Michelle Bowman

Already serving as Fed vice chair after Trump appointed her to that role in 2025, Bowman has established herself as a voice for community banks and rural economic concerns. Promoting her to the top job would be an unconventional but not unprecedented move.

Rick Rieder

BlackRock's Chief Investment Officer of Global Fixed Income brings a market practitioner's perspective. His experience managing trillions in bond investments gives him unique insight into how Fed policy transmits through financial markets.

What Trump Wants

The president has made no secret of his preferences. Trump has repeatedly called for lower interest rates and criticized Powell for being "too late" in cutting rates. In recent remarks, Trump stated bluntly that his nominee "needs to agree with me or they will never be Fed Chairman."

This pressure has raised questions about the independence of the next Fed chair—a cornerstone principle that central bankers and economists consider essential to credible monetary policy.

"The Fed's independence isn't just institutional tradition—it's fundamental to maintaining inflation credibility. Any perceived compromise could affect market expectations and borrowing costs for years."

— Former Federal Reserve official

Powell's Future Remains Uncertain

While Powell's term as chair ends in May, his position as a Fed governor extends until January 2028. The question of whether he'll remain on the board has sparked considerable speculation.

Most observers believe Powell will depart when his chairmanship concludes. Only one former Fed chair—Marriner Eccles in 1948—has stayed on as a regular governor after stepping down from the top position. The dynamics of serving under a successor he didn't choose would likely prove uncomfortable.

Adding complexity, the Supreme Court is scheduled to hear oral arguments on January 21 in a case involving Trump's attempt to dismiss Fed Governor Lisa Cook. The ruling, expected by mid-2026, could clarify whether presidents have authority to remove Fed officials over policy disagreements.

The Transition Timeline

Powell will preside over three more Federal Open Market Committee meetings before his term expires:

  • January 27-28: The first FOMC meeting of 2026
  • March 17-18: Quarterly projections update
  • May 5-6: Powell's likely final meeting as chair

Markets currently assign an 83% probability that the Fed will hold rates steady at the January meeting, with any additional cuts likely pushed to later in the year depending on economic conditions.

Market Implications

Investors are watching the selection process closely. A nominee perceived as likely to prioritize lower rates could weaken the dollar and boost risk assets in the near term. Conversely, a choice that raises concerns about Fed independence could rattle bond markets and push Treasury yields higher.

The "two Kevins"—Hassett and Warsh—represent somewhat different approaches. Hassett is viewed as more aligned with supply-side economic philosophy, while Warsh has historically emphasized financial stability concerns.

What to Watch

As January progresses, expect increased speculation and potential trial balloons from the White House. Trump has shown a willingness to change course on major appointments, so the shortlist could still evolve.

For investors and consumers alike, the Fed chair selection will influence mortgage rates, savings yields, and borrowing costs for years to come. The announcement, when it arrives, will be one of 2026's most market-moving events.