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It seems Donald Trump now considers appointing Jerome Powell as the Fed’s chair during his first term to be his biggest regret. However, Trump confidently asserts that if he truly wants Powell out, “he’ll be out of there real fast.” 

Lately, Trump’s frustration with Powell has grown due to the Fed chair’s reluctance to lower interest rates. This raises the question: if Trump were to fire Powell, who would be the ideal replacement, considering Trump’s specific demands?

Trump has a clear list of requirements for a Fed chair. Simply put, he wants someone who will follow his direction. Yet, interfering with the Fed’s independence would inevitably disrupt its crucial functions.

By all appearances, Powell has declined to cooperate with Trump on tariff issues and publicly states he is closely monitoring Trump’s actions. In the meantime, the US economy is starting to show signs of stalling. While market crashes don’t seem to faze Trump, a full-blown recession isn’t something he wanted.

According to a source close to the administration, former Fed governor Kevin Warsh is seen as the leading candidate. Other contenders include National Economic Council Director Kevin Hassett, Reagan-era economist Art Laffer, and economist and TV host Larry Kudlow, who previously served as NEC director during Trump’s first term. 

Sorting Through Top Fed Chairman Candidates

Trump needs a Fed chairman who supports tariffs and is prepared to cut rates whenever necessary. Jerome Powell’s perspective on tariffs is that Trump’s policies risked pushing inflation and employment further out of alignment with the central bank’s objectives. 

On the other hand, Kevin Warsh, currently seen as the front-runner for the Fed’s top spot, believes that tariff policies have less impact on inflation compared to deregulation and spending cuts.

Adding to the supporters of tariffs, Kevin Hassett has publicly stated that tariffs are proving effective, leading companies to return to the United States. He also confidently predicted that there is “no chance” the US will face a recession in 2025.

Much like the others, Art Laffer is on record believing that President Trump’s tariffs and ensuing trade talks would ultimately benefit both the US and the global economy.  Larry Kudlow is also firmly in favor of tariffs. He argues that the US has been unfairly targeted by tariffs for too long and it’s time to push back.

Fed governor Christopher Waller could also be a strong possibility. Unlike Powell, Waller suggests that tariffs will only have a temporary effect on inflation. In a recent speech, Waller indicated the central bank might need to lower interest rates to head off a recession. He also cautioned that economic growth could “slow to a crawl” if tariff levels remain elevated.

Predictions Point to Kevin Warsh Leading the Race on Polymarket

Based on various indicators, Kevin Warsh seems to be the most likely successor should Powell be replaced. He has relevant experience, having served the Fed during the turbulent financial period of 2008. He currently holds a significant lead in prediction markets, with 37% predicting his appointment, while other candidates trail with less than 10%.

However, a Wall Street Journal report mentioned that Trump discussed removing Powell with Warsh back in February and March. Warsh reportedly advised the president against taking action until Powell’s term naturally expires in May 2026.

Treasury Secretary Bessent also cautioned Trump against firing Powell prematurely. Just last week, Bessent stated that the administration plans to start interviewing potential candidates to replace Powell “sometime in the fall.” He emphasized the importance of the Fed’s monetary policy, calling it “a jewel box that needs to be kept safe.” This sentiment aligns with predictions from 41% who believe Powell will serve out his full tenure.

Conversely, Steve Moore, an adviser to Trump, estimated the probability of Trump firing Powell is barely 50/50. Despite the uncertainty, Moore maintains that the president should have the authority to make such a decision.

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Source: cryptopolitan.com