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Federal reserve President Jerome Powell mainly crossed two audiences on Capitol Hill this week, but is now heading for a much more important challenge: a potential threat that President Donald Trump could undermine his authority by soon naming his choice to lead the Central Bank next year.
As Powell testified on Wednesday Before the senatorial committee of banking services, generally holding cordial exchanges with the legislators, Trump was at the top of NATO in The Hague launching his last attacks against a man he had appointed For the work of the Fed almost eight years ago.
“I think he’s terrible,” Asset said when he was asked at a press conference on his intentions for the next Fed chief. Trump then called Powell A “very average mental person”, adding that he has “a weak IQ for what he does” and is “a very political guy”.
“I think she is a very stupid person, in fact,” said Trump.
While Powell Trump’s names is not particularly new, the words could now point out the action.
Potential candidates
In the wake of intense criticism, Wall Street buzzed on the potential of a “shadow chair”, Or someone that Trump could install as the central bank Gadfly until Powell’s term in May 2026.
The speech had an impact on the markets: traders accelerated betting on Thursday on the rate decreases this year, with three discounts now at around 60% dimensions, compared to a high probability of two a few days ago, according to data from the CME group. Treasury yields fell to the shortest end of the curve, where the Fed has its influence, falling much more than those at the end. The dollar was also strongly decreasing against its global counterparts.
Trump confirmed that he had a list of potential successors from Powell to “three or four people”, without naming the finalists.
The framework of potential candidates has become familiar: the secretary of the Treasury Scott Bessent, the director of the National Council of the Economy Kevin Hassett, the former governor of the Fed, Kevin Warsh A lower interest rate defender.
In some circles, Bessent has been considered a favorite, although sources familiar with Trump’s thought say that this is not necessarily the case. Bessent himself said he was not interested in work, although it could change if Trump asked him to take him.
A report in The Wall Street Journal Wednesday evening suggested that the former president of the World Bank David Malpass is also running. The newspaper’s report said Trump plans to appoint the successor earlier than expected in order to influence interest rates policy.
The Officials of the White House did not respond to a request for comments beyond Trump’s remarks at the press conference.
An active food
There are several problems, which makes Trump’s desire to name a chair now problematic. On the one hand, there are no immediate open positions, although the mandate of Governor Adriana Kugler ends in January 2026. Powell’s mandate as governor himself does not express before 2028, although the term president is exhausted next year.
“This plan is probably not constitutional and would politicize the Fed for a few months before stability was restored next May,” observed Greg Valliere, chief strategist of the AGF, observed Thursday. “But damage to the Fed independence would be considerable if Trump became a monetary driver on the back and the Fed policies of the fall.”
Trump-Powell’s latest tumult occurs for a busy period for the central bank.
In the past few days, the Fed has taken two important measures aimed at the bank: delete the “reputation risk” as a banking examination criteria, an apparent wink to Trump’s complaint concerning politically motivated denigration in large institutions and the relaxing of relaxation of relaxation Reserve the rules of capital for systemic banks. This last measure was pushed by the vice-president of supervision Michelle Bowman, also appointed by Trump, but someone who would be at best a finalist from outside the “shadow chair”.
Nevertheless, Trump’s biggest reproach, namely the refusal of the Federal Open Market Committee led by Powell, to reduce interest rates, remains a point of collision.
CHICAGO President Austan GOOLSBEE told CNBC in an interview Thursday that political waves are not a decision -making factor, nor the name of a ghost chair.
“It would have no effect on the FOMC itself,” said Goolsbee. “Look at the minutes and transcriptions. You can see, word for word, what is the justification to make decisions, and they are not elections and they are not a question of partisan policy.”
