Have you ever watched a horse race where one contender suddenly surges ten lengths ahead in the final turn? That’s exactly what the contest for the next Federal Reserve Chair feels like right now.
While most of us were busy with holiday planning, something remarkable happened in the normally sleepy world of central banking appointments. One name shot from respectable long-shot to overwhelming favorite in a matter of days – and the betting markets rarely get this stuff wrong.
The Clear Frontrunner
Kevin Hassett, currently serving as Director of the National Economic Council, has emerged as the prohibitive favorite to become the next Chair of the Federal Reserve when Jerome Powell’s term expires in May 2026.
Prediction markets – those remarkably accurate crowd-wisdom platforms that often outperform traditional polls – tell the story better than any insider leak ever could. As this week began, traders were assigning roughly three-out-of-four chances that Hassett gets the nod. Some platforms pushed that probability even higher, approaching 80%.
That’s not just noise. These are the same markets that called the 2016 election when nearly everyone else got it wrong. When they move this decisively, people in Washington and on Wall Street sit up and take notice.
What Trump Is Saying (And Not Saying)
The President himself added fuel to the fire during a recent flight aboard Air Force One. When pressed about the Fed chair selection, he delivered one of those classic Trump responses that somehow reveals everything while saying almost nothing.
“I know who I am going to pick, yeah. We’ll be announcing it.”
Then came the tell – that trademark smirk when Hassett’s name came up, followed by a quick pivot to “I’m not telling you.” In political Washington, that’s about as close to confirmation as you’re ever going to get without an official press release.
Hassett himself has played the game perfectly, neither confirming nor denying while making all the right sounds about serving if called. In my experience watching these transitions, that’s exactly how you position yourself when you know the job is yours but the formal announcement timing belongs to someone else.
The Other Contenders
To be fair, this wasn’t supposed to be a one-horse race.
Several highly credentialed candidates were considered serious possibilities just weeks ago. Current Fed Governors Christopher Waller and Michelle Bowman both brought deep institutional knowledge. Former Governor Kevin Warsh had the advantage of having served during the financial crisis. Even BlackRock’s Rick Rieder, a fixed-income legend, was getting mentioned in the conversation.
But something changed – dramatically and quickly. The prediction market odds for everyone else collapsed almost overnight. Today, the probability of “no announcement by Christmas” actually ranks second, ahead of any individual alternative candidate. That’s how dominant Hassett’s position has become.
Why Hassett Makes Sense
Look, I’ve covered enough of these appointments to recognize the pattern. Presidents don’t pick Fed chairs based purely on academic credentials or Wall Street popularity. They pick people they trust, people who share their economic worldview, and – perhaps most importantly – people who won’t embarrass them.
Hassett checks every box.
- He served as Chairman of the Council of Economic Advisers during Trump’s first term
- He understands the administration’s priorities intimately
- He’s demonstrated the ability to communicate complex economic ideas to both Wall Street and Main Street
- Perhaps most crucially, he shares the view that interest rates have been too high for too long
That last point cannot be overstated. The incoming administration has made no secret of its desire for significantly lower interest rates. They’ve been remarkably consistent on this point, and Hassett has been singing from the same hymnbook.
The Divided Fed He’ll Inherit
Whoever takes the job – and at this point it looks increasingly like Hassett – will walk into one of the most challenging environments in modern Fed history.
The current Federal Open Market Committee is genuinely split. You have one camp that sees storm clouds gathering in the labor market and believes additional rate cuts are urgently needed. Another group remains deeply concerned about inflation psychology becoming re-entrenched and worries that further easing could light that fire again.
Right now, markets are pricing in better than an 87% chance of a rate cut at the December meeting. But that’s just the beginning. The real question is what happens in 2026 and beyond, particularly as the composition of voting regional bank presidents shifts toward a more hawkish orientation.
The Coming Reform Battle
Perhaps the most interesting aspect of this transition – and the part getting least attention amid the horse-race coverage – is the growing consensus that the Federal Reserve needs fundamental reform.
Treasury Secretary Scott Bessent, who is leading the search process, has been remarkably candid about this. He believes monetary policy has become far too complicated and that the Fed needs to simplify its approach and reduce its footprint in financial markets.
“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.”
– Treasury Secretary Scott Bessent
He’s particularly focused on the role of regional Federal Reserve presidents, who sometimes seem to compete for media attention with conflicting messages that move markets. The suggestion that their public commentary might be reined in represents a significant potential shift in how the Fed operates.
What This Means for Markets
Let’s be honest – markets are loving the Hassett scenario.
The initial reports of his emergence as frontrunner triggered an immediate positive reaction across risk assets. Why? Because investors believe a Hassett-led Fed would be more accommodative, more predictable, and more aligned with the administration’s growth objectives.
Whether that’s ultimately good for the economy is a different question. There’s a legitimate debate about whether the Fed has already done too much or whether inflation risks remain underpriced. But markets rarely care about “should” – they care about “will.” And right now, they believe they know what will happen.
The Bigger Picture
Stepping back, what we’re witnessing is something bigger than just another personnel decision.
This feels like the beginning of a significant reordering of the relationship between the Federal Reserve and the elected branches of government. For decades, the Fed has operated with extraordinary independence – sometimes to the frustration of presidents from both parties.
The post-financial crisis era saw the central bank take on responsibilities far beyond traditional monetary policy – from bank supervision to climate risk assessment to payment system modernization. Many believe this mission creep has made the Fed both more powerful and less focused.
A Hassett appointment, combined with the reform agenda being articulated by key administration figures, suggests we’re heading into a period where the Fed’s role gets re-examined in fundamental ways. Some of this will be healthy. Some of it carries real risks.
What History Tells Us
It’s worth remembering that the Federal Reserve’s independence has never been absolute. Arthur Burns in the 1970s faced enormous pressure from the Nixon administration. Paul Volcker in the 1980s had to fight both political branches to break inflation’s back.
The most successful Fed chairs have been those who maintained operational independence while recognizing that, ultimately, they serve at the pleasure of elected officials who are accountable to voters. Finding that balance is more art than science.
The Bottom Line
Right now, all signs point to Kevin Hassett becoming the next Federal Reserve Chair. The prediction markets have spoken with unusual clarity. The President appears to have made his decision. The only remaining question is timing.
When that announcement comes – and it could be any day now – it will mark the beginning of what might be the most consequential shift in American monetary policy in a generation.
The new chair will inherit a divided institution at a pivotal moment for the U.S. economy. They’ll face pressure for both aggressive rate cuts and fundamental reform. How they navigate these crosscurrents will affect everything from mortgage rates to stock prices to the dollar’s global standing.
In other words, this isn’t just Washington personnel drama. This is about who controls the world’s most important economic lever at a time when the old certainties no longer apply.
And for now, the smart money says that person will be Kevin Hassett.
