Big changes are coming to the Fed — and interest rates — next year if this front-runner gets Powell’s job

Kevin Hassett, the front-runner to take over as Fed chairman in May, has a recent track record of calling for the central bank to cut interest rates.

Hassett is the most prominent candidate to replace Federal Reserve Chairman Jerome Powell when his term ends in May. Bloomberg I reported this week. President Donald Trump is expected to announce his choice to head the Federal Reserve Bank in the coming weeks.

Hassett is one of Trump’s top economic advisers and currently serves as director of the National Economic Council. In recent media interviews, Hassett criticized the Fed’s current leadership for not cutting interest rates quickly enough, in line with the views of his current chairman.

The central bank has already cut interest rates by a quarter of a percentage point at each of its last two meetings, and is now expected to do so again at its next meeting in December. However, the 12 officials voting on policy are divided on whether to keep interest rates high for longer to hold down inflation that remains above the Fed’s target of a 2% annual rate, or lower them to help boost a faltering job market.

The Fed has not cut interest rates fast enough for Trump, who has repeatedly threatened to fire Powell before his term ends and has said his choice to head the Fed would be someone who cuts rates. Given Hassett’s recent public comments, it’s clear where he stands on this debate.

In an interview with Yahoo Finance this week, Hassett said the bank should cut interest rates despite a surge in job growth in September, accused Powell of having “partisan” motives for his monetary policy decisions, and said the next Fed chair needs to “clean house.”

In other recent interviews, he has strongly defended Trump’s economic policies, including his controversial tariffs, and said he believes inflation will fall to about 1% next year while economic growth picks up.

Lower interest rates would reduce borrowing costs on short-term loans and possibly provide a boost to the economy. But some economists and Fed officials worry that cutting too sharply could lead to higher inflation, especially since Trump’s tariffs have already pushed up prices.

Hassett might take someone’s place, but who?

Hassett’s nomination would raise several questions about the future of the central bank and its independence from White House control. He must still receive Senate approval to take up the position.

It’s also unclear who will replace the 12-member FOMC, because, unlike other candidates Michael Bowman and Christopher Waller, he is not already on the board. Although Powell will no longer chair the Fed’s Board of Governors, his term as a regular member of the board does not end until 2028, and he could choose to stay on. Powell refused to answer questions about whether he would step down next May.

A seat could also open up for Hassett if the Supreme Court allows Trump to fire board member Lisa Cook. A third possibility is that he could replace fellow Trump nominee and rate-cut advocate Stephen Meiran, whose term expires in January 2026.

There is also the possibility of an unprecedented division in power, as reported by the British newspaper The Sun luckPowell could remain Chairman of the Federal Open Market Committee while Hassett serves as Chairman of the Federal Reserve Board of Governors. These are technically two different positions, and the FOMC chair is voted on by the board itself, which has traditionally chosen the Fed chairman as its own chair, but is not required by law.