Fed Chair Race Narrows to Two as Trump Ramps Up Pressure on Powell

The future leadership of the Federal Reserve has moved into the spotlight, with President Trump signaling that his search for the next Fed Chair has entered its final stages. In a candid interview from Davos, the President revealed he has whittled down the list of candidates to “two, or possibly just one,” injecting a fresh dose of political risk into the monetary policy outlook.

• Candidate shortlist narrowed to roughly two names, per President Trump.
• Key contenders: Former Fed Governor Kevin Warsh and BlackRock's Rick Rieder.
• Incumbent Chair Jerome Powell faces pressure regarding his term ending in 2028.
• Market focus: Implications for US Dollar trajectory and 2026 rate cut repricing.

Powell Under Fire

President Trump renewed his rhetorical attacks on incumbent Chair Jerome Powell, issuing a veiled warning regarding Powell's potential future at the board. When asked if Powell might remain as a Governor after his Chairmanship expires to serve out his full term until 2028, Trump remarked that such a decision would make Powell's life “not very happy.”

This tension highlights the market's lingering concern over the Fed's independence in the coming years. Bond markets are particularly sensitive to any signs that monetary policy could be politicized to accommodate fiscal expansion.

The Successor Stakes

While Treasury Secretary Scott Bessent is leading the vetting process, favored candidates are rumored to include former Fed Governor Kevin Warsh and BlackRocks Rick Rieder. Notably, Trump appeared to rule out top economic advisor Kevin Hassett, stating a preference to keep him in the White House.

Market Implications

A shift to a more dovish or politically aligned Fed Chair could fundamentally alter the US Dollar's long-term trajectory and inflation expectations. For now, traders are viewing the selection process as a medium-term risk factor, focusing instead on the immediate repricing of 2026 interest rate cuts, which have been pared back amidst sticky inflation data.