President Donald Trump’s narrowing of the shortlist for the next Federal Reserve chairman has significantly improved the prospects of former Federal Reserve Governor Kevin Warsh.
In recent days, Trump has publicly indicated that he is considering only two finalists — Kevin Warsh and Kevin Hassett, his current director of the National Economic Council — and described them as “the two Kevins.” The president stressed that he wanted a Fed leader willing to lower interest rates and consult with the White House on monetary policy. These remarks would mark a notable departure from the Fed’s traditional independence.
When US President Donald Trump named his two main candidates to replace Jerome Powell, the markets reacted quickly. Betting and cryptographically linked platforms market forecasts show massive support for Warsh. Traders now view him as a credible alternative to White House economic adviser Kevin Hassett.
Regardless, Trump will likely announce his nomination well before Powell’s term ends in May 2026.
Traders boost Warsh’s chances as Trump narrows Fed picks
In just a few days, Warsh’s chances of becoming the next Fed chairman went from 12% to more than 38%. The move follows reports that Trump narrowed his list to two finalists. Kevin Hassett remains the favorite to win. But his lead has weakened.
Now, after Trump went public with his praise, traders are recognizing the path forward for Warsh. Shareholders view the race for Fed chairman as essential. Trump has spoken out in favor of cutting interest rates. He said the United States should have the lowest rates of any major economy. This position is important for the markets.
Most traders expect the next Fed chair to advocate for faster and more aggressive rate cuts than the current stance. Warsh is considered open to this transition. His previous criticisms regarding the persistence of high rates are resurfacing in current debates.
This has helped build market confidence that it is more aligned with Trump’s economic priorities. Trump himself said Warsh was among his biggest choices. He also confirmed that he had interviewed several candidates in recent days.
Warsh would have been robust in these discussions. Other candidates continue to be considered. These are federal governors Chris Waller and Michelle Bowman, as well as Rick Rieder of BlackRock.
However, more and more attention has been focused on Warsh and Hassett. Support from Wall Street also helped fuel Warsh’s momentum. Jamie Dimon, chief executive of JPMorgan Chase, signaled his support for Warsh as a credible and stable option. This support has repercussions on financial markets.
Critics, on the other hand, have expressed concern. Some fear that Trump’s choices could eradicate the Fed’s independence. They say pressure for rapid rate cuts could worsen inflation risks. Trump dismissed these fears. He made lower prices a litmus test for his next fed chair.
Markets betting on aggressive Fed rate cuts
The Fed now fears slight rate cuts by 2026. However, traders believe Trump will quickly cut rates further when he names a rate cut supporter. Most market indicators currently suggest that some rate cuts will occur next year.
Some are considering three cuts, which is a far cry from the Fed’s median vision. Chicago Fed President Austan Goolsbee recently said the committee could cut interest rates more than expected if inflation continues to cool. His comments helped reinforce market perceptions.
Depending on who the president chooses to replace Powell as head of the Fed, this could be a deciding factor. A Warsh appointment could also mark a quicker turn toward looser monetary policy.
