Donald Trump's latest verbal grenade into the Federal Reserve's front yard has sent markets into a predictable, albeit brief, frenzy. By casually stating he wants Kevin Hassett to remain as National Economic Council director rather than grabbing the top Fed gig, Trump effectively slammed the door on Hassett's shortlist candidacy. The dollar responded with a surge, the US Dollar Index jumping over 20 points, while gold and silver prices took a sharp dive, as if the precious metals heard the news and decided to hedge their bets elsewhere.
This shuffle boosted Kevin Warsh's odds on prediction markets like Polymarket to a commanding 56%, making him the new favorite to inherit the monetary throne. Hassett's probability plummeted from around 35% to below 20%, a drop roughly as graceful as a lead balloon. Other candidates like Christopher Waller (16.2%) and Rick Rieder (7.2%) saw their chances hold steady or slightly rise, with all three having expressed support for lower interest rates—aligning perfectly with Trump's wishlist for cheaper money.
The drama extends to the current Fed Chair, Jerome Powell, who seems determined to cling to his seat like a degen holding onto a failing memecoin. With the Justice Department subpoenaing a grand jury over Fed building renovations, expectations have grown that Powell might stay on the Board of Governors after his chair term ends in May, despite his official term running until 2028. Powell has framed the subpoena as part of broader "government pressure and threats," essentially painting himself as the victim of a political witch hunt.
Analysts warn that if Powell remains on the board, it could create a perception of "dual authority," complicating Trump's plans to appoint new members and secure a majority for rate cuts. The Fed recently cut rates by 25 basis points for the third straight time but has adopted a wait-and-see stance, leaving the market guessing. For now, no radical policy changes are expected, but Powell's potential lingering presence could delay Trump's reshuffling of the board, turning the Fed's leadership transition into a slow-motion chess match rather than a swift checkmate.
