The most consequential personnel decision of 2026 isn't about a cabinet secretary or a Supreme Court justice. It's about who will control the world's most powerful central bank. And according to prediction markets, insiders, and the President himself, the choice has narrowed to two men who share a first name but little else: Kevin Hassett and Kevin Warsh.

President Trump has indicated he will announce his nominee to succeed Jerome Powell as Federal Reserve Chair by January 2026. Powell's term expires on May 15, and the transition will mark the first change in Fed leadership since 2018—arriving at a moment when interest rate policy, inflation, and political independence are all front and center.

The Two Frontrunners

Kevin Hassett, currently serving as director of the National Economic Council, is the insider's pick. He previously chaired the Council of Economic Advisers during Trump's first term and has been a vocal critic of the current Fed's cautious approach to rate cuts.

Hassett argues there is ample room for interest rate reductions due to strong productivity gains in the economy. His views align closely with the administration's stated preference for easier monetary policy. As of late December, the prediction market Kalshi showed Hassett with a 58% chance of securing the nomination—a commanding lead that reflects his proximity to the President and his willingness to advocate for lower rates publicly.

Kevin Warsh, a former Fed governor who served from 2006 to 2011, represents the more traditional, Wall Street-favored option. Warsh has deep experience in financial markets and central banking, and his appointment would likely be welcomed by institutional investors who prize continuity and credibility.

Kalshi gives Warsh a 25% chance of nomination, with Fed Governor Christopher Waller trailing at around 12%. Other potential candidates, including former Treasury officials, appear to have faded from serious contention.

The Policy Implications

The choice between Hassett and Warsh isn't merely a matter of personalities—it carries significant implications for monetary policy and market expectations.

Trump has made it abundantly clear that lower interest rates are a "litmus test" for his Fed Chair pick. He has repeatedly criticized Powell as being too slow and timid in pursuing cuts, and he expects his replacement to move more aggressively to reduce borrowing costs.

Hassett appears more likely to deliver on that expectation. His public statements suggest he would advocate for faster rate cuts based on his assessment that productivity gains have reduced inflationary pressures. Critics worry this approach could compromise Fed independence and invite political interference in monetary policy.

Warsh, by contrast, is seen as more willing to maintain the Fed's traditional independence from political pressure, even if he ultimately pursues similar policy outcomes. His appointment might provide more market stability, given his credibility with institutional investors and his prior experience on the FOMC.

What History Tells Us

Fed Chair transitions typically create short-term market volatility. According to historical data, the stock market often struggles in the first six months under new Fed leadership, with an average correction of about 15%. Investors tend to adopt a wait-and-see approach until the new chair's policy preferences become clear through actual decisions.

The current transition is complicated by several factors: persistent inflation above the Fed's 2% target, a labor market showing signs of softening, and heightened political attention to monetary policy. Unlike some previous transitions, this one occurs with the explicit expectation from the administration that policy will change.

The Confirmation Battle Ahead

Whoever Trump nominates will face Senate confirmation hearings that promise to be contentious. Democrats are likely to press the nominee on Fed independence, asking pointed questions about whether they would resist political pressure on interest rate decisions.

Republicans, meanwhile, may push for commitments to faster rate cuts and more transparent communication about policy goals. The hearings will provide the first public signals about how the new chair views the balance between supporting economic growth and controlling inflation.

Market Implications

For investors, the Fed Chair decision introduces an element of uncertainty that extends beyond the typical policy considerations. Key questions include:

  • Rate Cut Trajectory: Will the new chair accelerate the pace of rate cuts beyond what markets currently expect?
  • Inflation Tolerance: How will the new chair balance growth objectives against the risk of reigniting inflation?
  • Communication Style: Will the transition bring changes to how the Fed signals its intentions to markets?
  • Independence Perception: Will markets view the new chair as credibly independent, or will concerns about political influence create volatility?

The Timeline

Key dates to watch:

  • Early January: Expected announcement of Trump's nominee
  • January-February: Senate confirmation hearings
  • January 27-28: Powell's FOMC meeting (final meeting before confirmation likely)
  • May 15: Powell's term expires

The Bottom Line

The Two Kevins represent distinctly different paths forward for the Federal Reserve. Hassett offers alignment with the administration's preference for aggressive rate cuts, while Warsh provides a more conventional approach that may offer greater market continuity. Whichever Kevin emerges victorious, the decision will shape monetary policy, market dynamics, and the political economy of central banking for years to come.

For investors, the message is clear: prepare for heightened volatility around Fed policy in 2026, and pay close attention to the confirmation process that will determine the Fed's future direction.