The race to become the next Federal Reserve Chair took a dramatic turn on Friday when President Donald Trump revealed he would prefer to keep Kevin Hassett, his National Economic Council Director, in his current White House role rather than nominate him to succeed Jerome Powell at the central bank.

"I may want to keep Kevin where he is," Trump said during remarks at the White House on Friday afternoon. "He's doing a tremendous job. We'll see what happens, but I like Kevin where he is."

The "Battle of the Kevins" Intensifies

Trump's comments immediately reshuffled the odds in what traders have dubbed the "Battle of the Kevins"—the two-man sprint between Hassett and former Fed Governor Kevin Warsh to lead the world's most powerful central bank.

On PredictIt, Warsh surged to 48 cents following Trump's remarks, extending his lead over Hassett, who slipped to 35 cents. Just two weeks ago, Hassett had been the clear frontrunner at 52 cents with Warsh trailing at 38 cents.

"The prediction markets have essentially called the race for Warsh at this point," said Michael Strain, director of economic policy studies at the American Enterprise Institute. "Trump's comments suggest he values Hassett's day-to-day policy work more than his potential as Fed chair."

What This Means for Markets

The reshuffle comes at a particularly sensitive time for financial markets. Jerome Powell's term expires on May 15, 2026, giving Trump approximately four months to name a successor and shepherd the nomination through Senate confirmation.

Warsh, who served as a Fed governor from 2006 to 2011, is generally viewed as more market-friendly but has been critical of the Fed's post-2008 policy approach. He has advocated for a rules-based monetary policy framework and has questioned the central bank's massive balance sheet expansion.

"Warsh represents a return to more traditional central banking principles. Markets generally view him as someone who would prioritize price stability over employment maximization."

— Julia Coronado, President of MacroPolicy Perspectives

Hassett, by contrast, has been a vocal advocate for more aggressive rate cuts, arguing that strong productivity growth gives the Fed room to ease policy without sparking inflation. His potential nomination had raised concerns among some market participants about the independence of the central bank.

The Powell Question

The leadership transition has been complicated by an unprecedented development: the Department of Justice served the Federal Reserve with grand jury subpoenas in early January, prompting 14 global central bank heads to issue a statement defending Fed independence.

Powell himself has remained silent on his future plans. While his term as Fed chair expires in May, he still has the option to serve out his remaining two years as a governor on the Fed board, which runs until January 2028.

"Powell's decision on whether to stay as a governor will have significant implications for whoever takes the chair," noted Roberto Perli, head of global policy research at Piper Sandler. "A sitting ex-chair on the board creates an unusual dynamic."

Senate Confirmation Considerations

Both potential nominees face Senate scrutiny, though their challenges differ. Warsh's confirmation path appears smoother—he was previously confirmed unanimously when joining the Fed board in 2006, and he maintains relationships with senators from both parties.

Hassett's path was seen as more treacherous, with some senators expressing concerns about installing a Chair perceived as too politically aligned with the White House. His background as a think tank economist rather than a banker or market practitioner also raised questions among some Republicans.

Investment Implications

For investors, the shift toward Warsh has several potential implications:

  • Monetary Policy: Warsh is likely to maintain a more hawkish stance than Hassett, potentially keeping rates higher for longer
  • Balance Sheet: Warsh has advocated for faster balance sheet reduction, which could put upward pressure on longer-term Treasury yields
  • Forward Guidance: A Warsh-led Fed might move toward more rules-based policy communication, reducing the discretionary element in rate decisions
  • Bank Regulation: Warsh is expected to continue the current administration's push for lighter-touch regulation of financial institutions

The Federal Open Market Committee next meets January 27-28, with markets virtually certain the Fed will hold rates steady. By that meeting, Trump may have already announced his Fed chair pick, adding another layer of intrigue to what's typically a routine policy gathering.

For now, markets are adjusting to a world where Kevin Warsh—not Kevin Hassett—appears to be the man most likely to guide American monetary policy through whatever economic challenges await in Trump's second term.