As regime change looms at the Fed, one candidate emerges as frontrunner for chair

President Donald Trump knows who he’s going to select as the next Federal Reserve chair but isn’t saying yet. Prediction markets have their minds made up, but the front-runner also is playing it coy.

While that part of the mystery appears ready to clear up in the coming weeks, what’s far less certain is the type of environment the new central bank leader will face at a potential crossroads for the U.S. economy.

National Economic Council Director Kevin Hassett has been dubbed the clear favorite, buoyed by a Bloomberg News report last week that handicapped the five-person race to succeed current Chair Jerome Powell, whose term runs out in May.

Asked Sunday about the situation, Trump told reporters aboard Air Force One, “I know who I am going to pick, yeah. We’ll be announcing it.” Beyond that, he smirked when asked about Hassett, adding “I’m not telling you, we’ll be announcing it.”

The candidate himself made the rounds on the weekend talk circuit, also dodging questions about his prospects. Hassett is part of a field that also includes current Governors Christopher Waller and Michelle Bowman, former Governor Kevin Warsh and BlackRock fixed income chief Rick Rieder.

“I’m really honored to be amongst a group of really great candidates,” Hassett said Sunday on CBS’ “Face the Nation.” He did note that markets had a positive reaction to the report of him emerging as the favorite, saying that Americans “could expect President Trump to pick somebody who’s going to help them, you know, have cheaper car loans and easier access to mortgages at lower rates.”

Shortly before that, on Fox News, Hassett merely stated, “If he picks me, I’d be happy to serve.”

Predictions markets have been off to the races in recent days, placing firm odds on Hassett getting the job. As of Monday afternoon, Kalshi traders assigned a 79% probability, while PredictIt put the chance at 75% and Polymarket had it at just 63%, with “no announcement by Christmas” having the second-highest probability of 22%, easily topping any of the other four finalists.

Whomever the actual pick is will take over a Fed that is currently torn between officials who think additional interest rate cuts are warranted to head off potential trouble in the labor market against those who worry that inflation continues to pose a threat that would be exacerbated by further easing in monetary policy.

For the next rate decision on Dec. 10, futures market traders are assigning an 87.6% chance of a cut in trading that has been highly volatile in recent weeks.

Trump and other administration officials have been vocal about their preference for much lower rates, and the president has stated that is a litmus test for the next chair. In 2026, members of the rotating cast of regional presidents who get a vote on the Federal Open Market Committee will have a hawkish tilt, meaning a preference to fight inflation and hold rates steady.

But the coming Fed regime will be about more than rates.

In a CNBC interview last week, Treasury Secretary Scott Bessent, who is leading the Fed chair search, said he favors a rethink of the Fed’s mission.

“We’ve gotten to this point where monetary policy has gotten very complicated, and it’s more than just cutting rates,” he said. “I think we’ve got to kind of simplify things.”

In particular, Bessent singled out the role of regional presidents.

While they play a relatively limited role — at least compared to the chair and the Board of Governors — in setting rates and other issues related to monetary policy, public commentary from the local leaders can move markets at times.

Bessent said that is part of broader issues related to outsized role the Fed has grown to play in the economy and financial markets, largely since the financial crisis when the central bank played a pivotal role in implementing programs to guide the economy out of its worst slide since the Great Depression.

“I think it’s time for the Fed just to move back into the background like it used to do, calm things down and work for the American people, set monetary policy on a good course,” he said. “All these speeches by these bank presidents … are just redundant. Why don’t they actually just come out and talk about the meaningful issues to the American people, rather than the short term view of the next meeting?”

The view on regional presidents is important in that they come up for reappointment in 2026. While the local boards hire the presidents, they are subject to the Board of Governors’ approval. One issue Bessent also commented on was that several presidents are not from the districts they represent.

Mohamed El-Erian, the chief economic advisor at Allianz, applauded Bessent’s view.

“We don’t need a play-by-play Fed,” El-Erian said Monday morning on CNBC. “We need the Fed to cool it. We need the Fed to step back and take a bigger, sort of visionary view. And we need reforms. We desperately need reforms. And I think all five on the short list are committed to reforming that institution, which is critical, not just for the U.S. but for the global economy.”

Correction: The Federal Reserve’s next policy meeting is Dec. 9-10, with a rate decision released on the second day. An earlier version of this story misstated the date.